Everyone deserves a chance to build their financial future, not just the few who are born into wealth. That’s why public policy is critical: it can create an inclusive economy and provide wealth-building opportunities that enable everyone to enjoy financial security and freedom.

The Washington Future Fund (WFF) is a baby bonds policy proposal that the State Treasurer, lawmakers, and community organizations have been advocating for since 2021. This proposal is designed to reduce the racial wealth gap and end intergenerational poverty through publicly funded trust accounts for babies in families with fewer financial resources. The funds can be used in adulthood for seed capital in wealth-building activities like homeownership, higher education, and entrepreneurship.

The federal administration recently launched 530A accounts (also known as Trump Accounts), which stem from the same idea of making public investments in babies, but have major policy design flaws that will worsen the wealth gap, including the racial wealth gap.

Closing the racial wealth gap is more crucial in the face of federal cuts to basic needs

There are significant racial wealth disparities in our state due to the legacy of slavery, the forced removal of Native people from their ancestral lands, and policies like redlining and mass incarceration. These are just some of the ways that lawmakers have stripped wealth from Black, Indigenous, and Latinx communities and concentrated wealth among white people. In 2022, the median net worth of white households in Washington was $391,128, but only $29,276 for Black households – a 13-fold difference – and $69,829 for Latinx households – almost a 6-fold difference. In 2023, 66% of white households were homeowners, compared to only 30% of Black households and 43% of Latinx households.

Cuts to SNAP and Medicaid from Congressional Republicans’ harmful megabill, H.R. 1, will only worsen economic inequality as the basic services that families rely on to stay afloat are reduced and harder to access. This is why targeted policies to close the wealth gap are more important now than ever. Our state has made some progress, specifically through the establishment of a capital gains tax and Working Families Tax Credit (WFTC), and the recent passage of a Millionaires Tax, which includes a significant expansion of the WFTC. However, Washington’s regressive tax code continues to give the wealthiest few a substantial tax break, while working families with the least pay the most.

The Washington Future Fund is an equitable way to create a nest egg for the future

The WFF is a bold policy solution that addresses barriers to wealth by providing a nest egg to young people who were not born into wealth. When comparing the WFF to 530A accounts, there are significant differences: the WFF is targeted, accessible, and can reduce wealth inequities, while 530A accounts are untargeted, inaccessible, and even likely to increase wealth inequities. Below are a few of the differences in design components between the two programs:

• Initial public deposit: The WFF provides a $4,000 investment for every baby who receives Apple Health (Medicaid) before their first birthday. This targeted approach to families with fewer resources ensures that public funds reach children who are furthest from financial opportunity. On the other hand, 530A accounts give a $1,000 investment to all children born between January 1, 2025 and December 31, 2028, regardless of their family’s financial status.
• Fund management: The WFF is managed by the State Investment Board and is designed to automatically enroll all eligible babies, which removes barriers to access and results in much higher participation rates. In contrast, parents must file a tax form to open a 530A account or set up an account online, and they must manage the funds themselves. Opt-in programs have much lower participation rates, particularly among lower-income families, and individual management of the accounts creates barriers for families without the know-how of investing and managing the funds.
• Additional contributions: 530A accounts allow families and employers to contribute up to $5,000 a year to each account. This will increase wealth inequities since families with more disposable income can contribute more to their children’s accounts while households without wealth cannot do the same. At a 6% return, a child that receives $5,000 contributions every year will see their account grow to over $157,000 in 18 years, while children that don’t receive any additional contributions will have just $2,850.

Using public dollars to create more opportunity and financial security for young people is a sound idea, but programs must have thoughtful policy design and 530A accounts fall short of that. A true baby bonds program like the WFF can ensure that those impacted by centuries of racist policymaking are closer to a just economic future. Advocates, policymakers, and philanthropists who want to create equitable wealth-building opportunities in our state should focus on making the Washington Future Fund a reality.