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Connecticut Proposal Would Create “Baby Bonds” That Could Be Used to Start a Business Later On

  • Proposal in Connecticut legislature would establish a trust for low-income children to provide funds for certain purposes upon reaching adulthood, including investing in a business
  • Measure aims to address economic and race-based disparities in the state
  • Similar proposals have been floated at both the state and federal level

Summary by Dirk Langeveld

Connecticut’s state treasurer is advocating for a “baby bonds” trust program that could set newborns up with financing for several approved uses upon reaching adulthood, including starting a business.

State Treasurer Shawn T. Wooden issued a statement in support of the proposal, House Bill 6659, prior to a hearing before the Appropriations Committee. He said the bill “addresses long-standing economic and race-based wealth disparities by investing directly in children born into poverty” and has the potential to boost the Connecticut economy.

Wooden also held a press conference to express support for the bill along with State Representatives Gerry Reyes and Bobby Gibson; Wendy Simmons, executive director of the New Haven Children’s Ideal Learning District; and Rev. William McCullough of the Russell Temple CME Church in Bridgeport.

If approved, the trust would benefit any children born in the state on or after July 31 of this year whose birth was subject to medical coverage provided under HUSKY Health, Connecticut’s public health plan for low-income families. A sum of $5,000 would be transferred from the General Fund to the trust to be credited toward the beneficiary’s account upon their birth.

Upon turning 18, beneficiaries would be eligible to use the funds to invest in a Connecticut business, purchase a home in the state, pursue an education, or start a retirement savings account.

“This is a long-term investment in Connecticut’s economy that would reduce wealth inequality, foster financial empowerment among low income residents, and increase family net worth to help families break the cycle of generational poverty,” said Wooden.

The state treasurer would oversee the program and its investments, and funds would be tax-exempt. Funds for any individuals who are deceased or no longer Connecticut residents upon their 18th birthday would be returned to the trust.

A similar measure has been proposed at the federal level. The American Opportunity Account, put forward by Reps. Cory Booker and Ayanna Presley, would set up a $1,000 account upon birth and add up to $2,000 a year until the beneficiary’s 18th birthday. The program would be income-based.

Connecticut State Rep. Geoff Luxenberg has also proposed a broader baby bonds program, which would provide start an account with $2,500 for all children born in the state and add $1,000 a year until their 18th birthday in a bid to provide greater financial security for their transition to adulthood.

Critics of such proposals say they would be too costly, discourage personal savings, represent government overreach, and hinder efforts to address financial challenges brought on by the COVID-19 pandemic.

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