The typical white household in D.C. has a net worth of $284,000, compared to $3,500 for Black households, according to the Urban Institute. Advocates say "baby bonds" could help close that gap.
The D.C. Council on Tuesday unanimously approved a bill creating a "baby bonds" program that will put up to $1,000 a year into trust funds for low-income kids, allowing them to access the money only after they turn 18.
Councilmember Kenyan McDuffie (D-Ward 5) introduced the bill earlier this year, pitching it as a mechanism to close the city's vast racial wealth gap. Baby bonds were the centerpiece of U.S. Sen. Cory Booker's (D-New Jersey) brief presidential run in 2019, and he re-introduced his baby bonds legislation in February.
Under McDuffie's bill, any child born in D.C. on or after Oct. 1, 2021, to a family enrolled in Medicaid and making less than 300% of the federal poverty line will be enrolled in a Child Trust Fund. Children whose families live at or under the federal poverty line — which is $26,500 per year for a household of four — will receive an initial $500 deposit in that account, followed by annual deposits capped at $1,000. A four-person household earning no more than $79,500 a year would get the same initial $500 starting deposit but then $600 per year for each eligible child.
The children will keep receiving the deposits provided they remain in the city and under the income thresholds, and the money will be managed by an independent fiduciary. Once they turn 18, they will gain access to the trust fund — but will only be able to use it to pay for education, buy a house or commercial property, start a business, or invest in stocks, bonds, or shares. If any child becomes ineligible because of income, the annual deposits will stop, but they will still have access to the money once they turn 18.
Roughly 9,200 children are born every year in D.C., and an estimated 20% are below the poverty line. An assessment of the bill by the council's Office of Racial Equity determined that the initiative could advance economic outcomes for eligible residents, though it raised concerns with the program's strict eligibility requirements.
"I introduced this bill because too many low-income families — which are disproportionately Black and Latinx — are unable to escape the cycle of poverty and continue to be displaced from our city," said McDuffie during Tuesday's legislative session. "The only way to address these monumental inequities is to give residents with those backgrounds more opportunities to build wealth which they can pass down."
The typical white household in D.C. has a net worth of $284,000, compared with $3,500 for Black households, according to the Urban Institute.
The baby bonds program is expected to cost $32 million over its first four years, the cost of which was included in the 2022 budget the council passed in August and which took effect earlier this month. It joins another initiative approved by the council that expands access to a tax credit that has historically helped families escape poverty.
This story is from DCist.com, the local news website of WAMU.