July 23, 2025 • 17 mins
Who are Trump Accounts really for, and will they actually help families save? With yet another savings vehicle added to an already confusing system, do these accounts solve a real problem—or just add more complexity?
In this episode, we break down what Trump Accounts are, how they work, and why they might not be the game-changer they sound like. We also explore why the U.S. savings system is failing most Americans and what a simpler, universal approach could look like.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Kyle Hulehan (00:00):
Hello and welcome to the Deduction of Tax
Foundation podcast.
I'm your host, Kyle Houlahan,and we are back with another
episode today.
we are joined by Alex Marsano,senior Policy Analyst at Tax
Foundation.
Alex, how you doing today?
Alex Muresianu (00:12):
Doing well, Kyle, how are you?
Kyle Hulehan (00:13):
I'm good.
Are you getting tired of the onebig, beautiful Bill?
Are you excited to talk aboutstuff that relates to Where are
you at right now?
Alex Muresianu (00:20):
Uh, I'd say, I know it's what I gotta do.
Kyle Hulehan (00:26):
Yeah.
Fair enough.
enough.
Alex Muresianu (00:29):
I.
Kyle Hulehan (00:29):
Okay, well let's dive in because today we have an
interesting topic that a lot ofpeople wanna know more about
what's going on with the Trumpaccounts.
what exactly are the Trumpaccounts and how do they fit
into the one big, beautifulbill?
Alex Muresianu (00:41):
I think the first thing to say is they're a
relatively small part of the onebig beautiful bill, And just in
terms of order of magnitude, theone big beautiful bill is about,
four.
Uh, trillion dollar, tax, cuteven after factoring in, uh, you
know, economic growth.
Um, but a$4 trillion, of net taxcuts.
(01:02):
And, you know, Trump accountsare, somewhere in the 10 to$20
billion range.
So a, very small percentage ofthe bill.
It's a relatively small policy.
And within that.
Subcategory and within the Trumpaccounts, it's really two
policies.
the first is these payments forchildren born between the
(01:24):
beginning of 2025 and the end of2028.
these, payments of$1,000 willsit sort of protected in an
account until at least, a kidturns 18.
And we can get into thespecifics of that later.
So there's these directpayments.
That are, held in theseaccounts.
And there's also the option to,contribute to these accounts out
(01:49):
of your own pocket or a thirdparty, can contribute, to these
accounts.
they have, some tax advantages,relative to a brokerage account,
but they're not particularly,uh, strongly tax advantaged.
The Trump account is acombination of the direct
payment, and that's sort of theexciting part.
I think the part that has caughtpeople's eye.
but there's also the actual,account contribution, dynamics,
(02:11):
which are, um, generally lessgenerous than most other tax
advantaged accounts.
Kyle Hulehan (02:16):
and we can probably get into this part here
in this question'cause I wonderhow long it might take for
people to get that thousanddollars and when it would help
them.
But who are the Trump accountsreally designed for and will
they actually help families?
Alex Muresianu (02:29):
so I think there are a couple of.
Dimensions to consider whenasking who is this policy
supposed to benefit?
There are two arguments that Ithink people have brought
forward to defend the Trumpaccounts or sell the idea of the
Trump accounts.
There is, on the one hand, thegoal of.
(02:53):
Supporting long-term, wealthbuilding.
the idea that, we'll put thismoney away.
Uh, you can, you know, theaccount managers, you know, the,
the.
Parents, uh, you know, caninvest the money in this account
and it'll grow and kids will beable to access those funds when
they become an adult or, longeror, they can even keep them in
(03:16):
that account for a very longtime.
And the power of compoundinterest, you know, build
financial security, uh, forthem.
But then the other side of theargument is that it is a policy
for families and for,incentivizing, you know, um.
Uh, more kids, uh, and, andsupporting, families more.
at least on the, latterperspective, I think if you're
(03:36):
gonna design a policy forhelping kids, it would make more
sense to focus that, policy onimmediate sort of benefits.
You know, the, the transition ofhaving, kids, you know, for the
first time.
Uh, that is a sort of, much moreimportant point.
Where you'd need, additionalsort of financial support, then,
(03:57):
then once, the kids turn 18.
it's not really an ideal policyfor supporting families or
supporting children or youngfamilies.
As far as long-term wealthbuilding, I mean, certainly the
government contribution of athousand dollars, I mean, that's
notable.
and that's a reason to try andkeep track of this account,
Ultimately, there are a lot ofaccounts that already exist with
different eligibilityrequirements and, restrictions,
(04:22):
on how the funds are used oraccessed.
That the ability to contributeto a Trump account is not much
of an improvement over thestatus quo, and it is a move
towards sort of a, a complexitythrough another sort of tax
advantaged account rather than asimplification to make these
(04:42):
programs more accessible.
Kyle Hulehan (04:43):
You know, we're, we're both younger here and
probably newer to all theretirement savings, all of the
accounts you have to use, so itis confusing.
There is currently.
11 existing tax advantage savingvehicles and, and, and Trump
accounts are just sort of addingto that already confusing system
and, and we're throwing up a, atable here that shows the
savings vehicle and it'sconfusing.
(05:04):
Could you just kind of, youknow, break it down for us a
little bit, like what are theseaccounts and what's going on
with them?
Alex Muresianu (05:10):
the biggest, tax advantaged accounts, are the
retirement, accounts, you canhave traditional retirement
plans, or sort of Roth style,retirement plans.
some are the.
Sort of workplace 401k, whereyou have, you know, they're sort
of done through your employer.
And then you can have in thereare individual ones, uh, as
(05:33):
well.
But the idea here is, isbasically these accounts have
one layer of tax, traditionalstyle you contribute.
Money and those contributionsare deductible.
and then the withdraws when youretire and they're only sort of
fully accessible without apenalty when you retire, are
taxable.
then there are the Roth style.
(05:53):
retirement accounts where yourcontributions are taxed as part
of your income.
but when you withdraw money,that money is tax free when you
retire.
in both cases there are somespecific, uh, qualified expenses
that allow you to withdraw.
Money, but general rules, you'renot allowed to access these
funds, until 59 and a half.
(06:15):
then there are several other,tax advantage savings accounts
of various kinds.
it's useful to think in terms ofthose two categories of is the,
are the withdrawals taxed or arethe, um, uh, contributions
taxed?
With Roth and traditional 4 0 1Ks, only one is taxed.
(06:36):
In Roth's case, thecontributions are taxed in the
traditional case, the,distributions are taxed.
there are several other accountsthat.
Some of which have exemptions onboth sides, like, health savings
accounts, others, uh, Trumpaccounts sort of best fitting
this, although there are some,uh, uh, exceptions don't have,
(06:59):
uh, uh, deductions forcontributions or, full tax
exemptions for withdrawals.
you do have.
this sort of tax deferral ideawhere if you have investments,
in the account, it's sort ofshielded, uh, and you don't have
to, so index funds or, or fundslike that, sometimes payout.
(07:19):
dividends are, are capitalgains, very various kinds.
you can sell in index fund andrepurchase it, and as long as
the money stays in the account,there's a tax deferral.
It doesn't trigger tax liabilityif you make those transactions.
it's a tax benefit relative to abrokerage account, but it's
generally not as powerful asthe, deduction, or exemption for
contributions or, orwithdrawals.
Kyle Hulehan (07:40):
so with all of these different accounts, the
Trump account is really justsort of to a complex system and
a confusing system and notreally providing something new
for Americans.
Alex Muresianu (07:53):
Yeah, I mean, I think the main new thing is the
thousand dollars from Uncle Sam.
I think that is.
Really the differentiatingfactor and maybe there's a case
one could make that by makingthis contribution from the
government people are morelikely to utilize the account
for other contributions to savemore.
but you know, if, so that's aroundabout way, to do it.
(08:14):
A very poor sort of halfsolution where if.
Savings accounts are complicatedand have a lot of restrictions
or eligibility requirements.
it seems like an expensivesolution to that problem, to put
money in another one of theseaccounts just to get people to
use them.
the better option would besimplifying the collection of
savings accounts we have todayinto ones that are, fewer, and
(08:39):
More, accessible and easier tofollow.
Kyle Hulehan (08:41):
I'm gonna follow up, uh, with this is I often say
here that I am.
a little bit confused by the taxsystem and a little bit confused
by all the savings systems as ayounger person trying to save
for retirement, I know that thisis your job, but have you found
it confusing at all?
Alex Muresianu (08:56):
Sure.
Yeah.
No, I, I, I think there are somethings where I'm fairly certain
that.
I, you know, there, there mightbe some extra benefit in one of
those type, some certain type ofaccount, for me to set up.
But it's like.
What is the added benefit ofsetting up, a fourth different
type of savings account versushow much time I'm gonna spend
(09:18):
having to spend to, to set up,that account and manage it and
remember that I've gotta keeptrack of it.
how much is the payoff there?
And usually, I mean, not everycase, but, um, usually I say,
ah, that, that doesn't reallyfeel like it's worth my time.
I might be unusual in, in otheraspects of finding tax
interesting.
But generally I don't likehaving to keep track of, 15
(09:39):
different financialinstitutions.
somebody who is perhaps on paperrationally maximizing their,
their, tax, treatment mice.
Kyle Hulehan (09:47):
I completely understand that.
I feel like I'm in the sameboat.
it's hard to keep track of allof it.
let's talk about maybe somesolutions here.
What could be better, if wecould redesign the saving system
from scratch, what would asimpler, more effective approach
look like?
are there any other countries orplaces that we could model this
after?
Alex Muresianu (10:06):
So the big picture, structural fix.
If you were redesigning theincome tax from scratch, what
would you do?
Well, the current income tax,for the most part, with the
exception of some retirementaccounts is you earn income and
you are taxed on that income.
Now, if you go out and spend.
That income you do not face anextra layer of tax, at the
(10:26):
federal level.
But if you save that income andinvest it and then it grows and
you sell, your investments, toconsume, say five, 10 years in
the future, you are taxed again.
The income that you decide toconsume, you spend on, pies.
I think of consumption.
I think of someone eating a pie.
(10:46):
uh, you only face one level oftax, but if you, decide to save
that money and invest it, and inthe future buy a pie, you end up
paying taxes twice.
So the.
Sort of broad structural fix ifyou were, redesigning the income
tax from scratch would be to,have a system where effectively
(11:07):
all saving would be deductible.
Um.
When you first earn income, ifyou put money away, you deduct
that from your income taxliability.
in the future, when you decideto take those savings out to
consume, you pay taxes, on them,this would create effective tax
neutrality between consuming andsaving your income.
(11:28):
that is the like big picture,structural fix.
now the improvement on the sortof current system where we're
accepting the, the, the premisesof, of roughly the current
income tax, would be introducinga Universal savings account, you
could imagine it working like aRoth or a traditional,
retirement account.
(11:48):
but basically instead of a,retirement account where you
have this savings andconsumption neutrality where you
have, you know, only one layerof tax on saving, But it's
restricted.
and you can only withdraw moneyfrom these retirement accounts
when you're retired withoutfacing a penalty.
(12:08):
With the Universal Savingsaccount, you can access that tax
treatment immediately, for anypurpose, not just retirement.
a good example might be savingfor, a house or an emergency
fund for, major expenses.
You know, major variableexpenses.
Like, medical expenses.
we have.
health savings accounts andhealth savings accounts actually
(12:29):
have among the most, generous,tax treatment, because they have
exemptions for bothcontributions and withdrawals.
But they're restricted, they'rerestricted to qualified medical
expenses or qualified healthcareexpenses.
the idea of a universal savingsaccount is that it would be
accessible.
At a shorter timeframe than aretirement account.
(12:51):
it would cover all manner.
And, and we'd be able to accessit for all manners of, of
expenses, on an immediate term,or a, you know, shorter
timeframe than, than untilretirement, than after
retirement.
and it would also not berestricted by different
categories of, of expenses,which, which many, or most of
the, other saving accounts are.
Kyle Hulehan (13:10):
And like a, like a Roth IRA or a 401k or some of
those things, it earns money onthe stock market.
is that how that works?
Right.
Alex Muresianu (13:19):
yes, you can invest the, contributions to, a
Universal savings account.
Kyle Hulehan (13:23):
Are there any cases or any countries that we
could, follow up in terms oflike, how is this successful?
Has it helped low income folks?
what have we seen there?
Alex Muresianu (13:30):
Yeah, so there actually has been, a few
examples of, universal savingsaccounts in practice in,
countries that we think of asrelatively similar to the United
States, Canada and the UnitedKingdom have introduced versions
of universal savings accountsrecently, and have seen quite
good uptake, of them, especiallyrelative to some of these
savings accounts we have formore specific purposes in the
(13:53):
United States.
And that's particularly true atlower income levels where if you
have, you know, you're able tosave some money, not much, but
some, and on top of, making youreveryday expenses you're able to
save some money, but you.
are not financially stable orcomfortable enough to be
(14:15):
confident to put it away in aindividual retirement account,
where it is effectively sort oflocked away And you also might
not want to put those savingsinto, a health savings account
or other specialized savingsaccount where it's restricted
for a specific purpose.
you want to be able to save andinvest and have the tax benefits
(14:37):
of a neutral savings accountwhere there's tax only on one
level of saving or, or one levelof consumption, you want to be
able to have access to that fairtax treatment.
But, you don't wanna lockyourself in to any one type of
expense or do you don't want tolock that money away.
Until retirement.
and so a universal savingsaccount makes the tax treatment,
(15:00):
the neutral tax treatmentbetween savings and consumption
accessible.
but it it also allows for muchmore flexibility.
And, simplicity as well.
it would make sense to replace alot of the existing savings
accounts with something like aUniversal Savings account.
the uptake would likely behigher among, lower income
households, and would also beeasier to comply with and
(15:24):
manage.
Kyle Hulehan (15:24):
I gotta say as someone who is not trying to
keep track of all of theseaccounts, I personally would
love something like this thatwould be a little bit more
simple, a little bit morestreamlined, and I think it's
something that honestly, I thinkeverybody could get on board
with.
Who doesn't want.
Their, their savings simplified.
I, I feel like this is kind ofa, left, right?
Like we can come together on isthere anything else that you
(15:47):
feel like you need to get offyour chest about Trump accounts?
Alex Muresianu (15:50):
Well, I mean, uh, I, I think this was, this
was a real missed opportunity,not only on a policy level, but
you want to talk about, catchy,patriotic branding, which we
have, Trump accounts or MAGAaccounts, which are rah rah, but
have a certain politicalvalence, who couldn't get on
board with a USA.
Kyle Hulehan (16:07):
That's true.
account.
USA baby.
Alex Muresianu (16:09):
yeah.
Kyle Hulehan (16:10):
They missed.
Ugh, dude.
Alex Muresianu (16:12):
Very disappointing.
Kyle Hulehan (16:13):
terrible.
Yeah.
It was a good chance.
And July 4th, I mean
Alex Muresianu (16:17):
it would've, yeah.
USA is on, you know, 1776.
America is made, USA is made,
Kyle Hulehan (16:26):
We did it.
Alex Muresianu (16:26):
could have been July 4th, 2025 USAs are made.
That was a missed opportunity.
Kyle Hulehan (16:31):
Yeah.
It really was.
Well, Alex, thank you for beingon the show today.
Thank you for breaking this downwith us.
And before we sign off, if youhave any burning questions, on
taxes, you can send them ourway.
You can drop a comment onYouTube and you can email us at
podcast@taxfoundation.org.
You can slide into our dms atDeduction Pod on Twitter.
Thanks for listening.
Hello and welcome to the Deduction of Tax
Foundation podcast.
I'm your host, Kyle Houlahan,and we are back with another
episode today.
we are joined by Alex Marsano,senior Policy Analyst at Tax
Foundation.
Alex, how you doing today?
Alex Muresianu (00:12):
Doing well, Kyle, how are you?
Kyle Hulehan (00:13):
I'm good.
Are you getting tired of the onebig, beautiful Bill?
Are you excited to talk aboutstuff that relates to Where are
you at right now?
Alex Muresianu (00:20):
Uh, I'd say, I know it's what I gotta do.
Kyle Hulehan (00:26):
Yeah.
Fair enough.
enough.
Alex Muresianu (00:29):
I.
Kyle Hulehan (00:29):
Okay, well let's dive in because today we have an
interesting topic that a lot ofpeople wanna know more about
what's going on with the Trumpaccounts.
what exactly are the Trumpaccounts and how do they fit
into the one big, beautifulbill?
Alex Muresianu (00:41):
I think the first thing to say is they're a
relatively small part of the onebig beautiful bill, And just in
terms of order of magnitude, theone big beautiful bill is about,
four.
Uh, trillion dollar, tax, cuteven after factoring in, uh, you
know, economic growth.
Um, but a$4 trillion, of net taxcuts.
(01:02):
And, you know, Trump accountsare, somewhere in the 10 to$20
billion range.
So a, very small percentage ofthe bill.
It's a relatively small policy.
And within that.
Subcategory and within the Trumpaccounts, it's really two
policies.
the first is these payments forchildren born between the
(01:24):
beginning of 2025 and the end of2028.
these, payments of$1,000 willsit sort of protected in an
account until at least, a kidturns 18.
And we can get into thespecifics of that later.
So there's these directpayments.
That are, held in theseaccounts.
And there's also the option to,contribute to these accounts out
(01:49):
of your own pocket or a thirdparty, can contribute, to these
accounts.
they have, some tax advantages,relative to a brokerage account,
but they're not particularly,uh, strongly tax advantaged.
The Trump account is acombination of the direct
payment, and that's sort of theexciting part.
I think the part that has caughtpeople's eye.
but there's also the actual,account contribution, dynamics,
(02:11):
which are, um, generally lessgenerous than most other tax
advantaged accounts.
Kyle Hulehan (02:16):
and we can probably get into this part here
in this question'cause I wonderhow long it might take for
people to get that thousanddollars and when it would help
them.
But who are the Trump accountsreally designed for and will
they actually help families?
Alex Muresianu (02:29):
so I think there are a couple of.
Dimensions to consider whenasking who is this policy
supposed to benefit?
There are two arguments that Ithink people have brought
forward to defend the Trumpaccounts or sell the idea of the
Trump accounts.
There is, on the one hand, thegoal of.
(02:53):
Supporting long-term, wealthbuilding.
the idea that, we'll put thismoney away.
Uh, you can, you know, theaccount managers, you know, the,
the.
Parents, uh, you know, caninvest the money in this account
and it'll grow and kids will beable to access those funds when
they become an adult or, longeror, they can even keep them in
(03:16):
that account for a very longtime.
And the power of compoundinterest, you know, build
financial security, uh, forthem.
But then the other side of theargument is that it is a policy
for families and for,incentivizing, you know, um.
Uh, more kids, uh, and, andsupporting, families more.
at least on the, latterperspective, I think if you're
(03:36):
gonna design a policy forhelping kids, it would make more
sense to focus that, policy onimmediate sort of benefits.
You know, the, the transition ofhaving, kids, you know, for the
first time.
Uh, that is a sort of, much moreimportant point.
Where you'd need, additionalsort of financial support, then,
(03:57):
then once, the kids turn 18.
it's not really an ideal policyfor supporting families or
supporting children or youngfamilies.
As far as long-term wealthbuilding, I mean, certainly the
government contribution of athousand dollars, I mean, that's
notable.
and that's a reason to try andkeep track of this account,
Ultimately, there are a lot ofaccounts that already exist with
different eligibilityrequirements and, restrictions,
(04:22):
on how the funds are used oraccessed.
That the ability to contributeto a Trump account is not much
of an improvement over thestatus quo, and it is a move
towards sort of a, a complexitythrough another sort of tax
advantaged account rather than asimplification to make these
(04:42):
programs more accessible.
Kyle Hulehan (04:43):
You know, we're, we're both younger here and
probably newer to all theretirement savings, all of the
accounts you have to use, so itis confusing.
There is currently.
11 existing tax advantage savingvehicles and, and, and Trump
accounts are just sort of addingto that already confusing system
and, and we're throwing up a, atable here that shows the
savings vehicle and it'sconfusing.
(05:04):
Could you just kind of, youknow, break it down for us a
little bit, like what are theseaccounts and what's going on
with them?
Alex Muresianu (05:10):
the biggest, tax advantaged accounts, are the
retirement, accounts, you canhave traditional retirement
plans, or sort of Roth style,retirement plans.
some are the.
Sort of workplace 401k, whereyou have, you know, they're sort
of done through your employer.
And then you can have in thereare individual ones, uh, as
(05:33):
well.
But the idea here is, isbasically these accounts have
one layer of tax, traditionalstyle you contribute.
Money and those contributionsare deductible.
and then the withdraws when youretire and they're only sort of
fully accessible without apenalty when you retire, are
taxable.
then there are the Roth style.
(05:53):
retirement accounts where yourcontributions are taxed as part
of your income.
but when you withdraw money,that money is tax free when you
retire.
in both cases there are somespecific, uh, qualified expenses
that allow you to withdraw.
Money, but general rules, you'renot allowed to access these
funds, until 59 and a half.
(06:15):
then there are several other,tax advantage savings accounts
of various kinds.
it's useful to think in terms ofthose two categories of is the,
are the withdrawals taxed or arethe, um, uh, contributions
taxed?
With Roth and traditional 4 0 1Ks, only one is taxed.
(06:36):
In Roth's case, thecontributions are taxed in the
traditional case, the,distributions are taxed.
there are several other accountsthat.
Some of which have exemptions onboth sides, like, health savings
accounts, others, uh, Trumpaccounts sort of best fitting
this, although there are some,uh, uh, exceptions don't have,
(06:59):
uh, uh, deductions forcontributions or, full tax
exemptions for withdrawals.
you do have.
this sort of tax deferral ideawhere if you have investments,
in the account, it's sort ofshielded, uh, and you don't have
to, so index funds or, or fundslike that, sometimes payout.
(07:19):
dividends are, are capitalgains, very various kinds.
you can sell in index fund andrepurchase it, and as long as
the money stays in the account,there's a tax deferral.
It doesn't trigger tax liabilityif you make those transactions.
it's a tax benefit relative to abrokerage account, but it's
generally not as powerful asthe, deduction, or exemption for
contributions or, orwithdrawals.
Kyle Hulehan (07:40):
so with all of these different accounts, the
Trump account is really justsort of to a complex system and
a confusing system and notreally providing something new
for Americans.
Alex Muresianu (07:53):
Yeah, I mean, I think the main new thing is the
thousand dollars from Uncle Sam.
I think that is.
Really the differentiatingfactor and maybe there's a case
one could make that by makingthis contribution from the
government people are morelikely to utilize the account
for other contributions to savemore.
but you know, if, so that's aroundabout way, to do it.
(08:14):
A very poor sort of halfsolution where if.
Savings accounts are complicatedand have a lot of restrictions
or eligibility requirements.
it seems like an expensivesolution to that problem, to put
money in another one of theseaccounts just to get people to
use them.
the better option would besimplifying the collection of
savings accounts we have todayinto ones that are, fewer, and
(08:39):
More, accessible and easier tofollow.
Kyle Hulehan (08:41):
I'm gonna follow up, uh, with this is I often say
here that I am.
a little bit confused by the taxsystem and a little bit confused
by all the savings systems as ayounger person trying to save
for retirement, I know that thisis your job, but have you found
it confusing at all?
Alex Muresianu (08:56):
Sure.
Yeah.
No, I, I, I think there are somethings where I'm fairly certain
that.
I, you know, there, there mightbe some extra benefit in one of
those type, some certain type ofaccount, for me to set up.
But it's like.
What is the added benefit ofsetting up, a fourth different
type of savings account versushow much time I'm gonna spend
(09:18):
having to spend to, to set up,that account and manage it and
remember that I've gotta keeptrack of it.
how much is the payoff there?
And usually, I mean, not everycase, but, um, usually I say,
ah, that, that doesn't reallyfeel like it's worth my time.
I might be unusual in, in otheraspects of finding tax
interesting.
But generally I don't likehaving to keep track of, 15
(09:39):
different financialinstitutions.
somebody who is perhaps on paperrationally maximizing their,
their, tax, treatment mice.
Kyle Hulehan (09:47):
I completely understand that.
I feel like I'm in the sameboat.
it's hard to keep track of allof it.
let's talk about maybe somesolutions here.
What could be better, if wecould redesign the saving system
from scratch, what would asimpler, more effective approach
look like?
are there any other countries orplaces that we could model this
after?
Alex Muresianu (10:06):
So the big picture, structural fix.
If you were redesigning theincome tax from scratch, what
would you do?
Well, the current income tax,for the most part, with the
exception of some retirementaccounts is you earn income and
you are taxed on that income.
Now, if you go out and spend.
That income you do not face anextra layer of tax, at the
(10:26):
federal level.
But if you save that income andinvest it and then it grows and
you sell, your investments, toconsume, say five, 10 years in
the future, you are taxed again.
The income that you decide toconsume, you spend on, pies.
I think of consumption.
I think of someone eating a pie.
(10:46):
uh, you only face one level oftax, but if you, decide to save
that money and invest it, and inthe future buy a pie, you end up
paying taxes twice.
So the.
Sort of broad structural fix ifyou were, redesigning the income
tax from scratch would be to,have a system where effectively
(11:07):
all saving would be deductible.
Um.
When you first earn income, ifyou put money away, you deduct
that from your income taxliability.
in the future, when you decideto take those savings out to
consume, you pay taxes, on them,this would create effective tax
neutrality between consuming andsaving your income.
(11:28):
that is the like big picture,structural fix.
now the improvement on the sortof current system where we're
accepting the, the, the premisesof, of roughly the current
income tax, would be introducinga Universal savings account, you
could imagine it working like aRoth or a traditional,
retirement account.
(11:48):
but basically instead of a,retirement account where you
have this savings andconsumption neutrality where you
have, you know, only one layerof tax on saving, But it's
restricted.
and you can only withdraw moneyfrom these retirement accounts
when you're retired withoutfacing a penalty.
(12:08):
With the Universal Savingsaccount, you can access that tax
treatment immediately, for anypurpose, not just retirement.
a good example might be savingfor, a house or an emergency
fund for, major expenses.
You know, major variableexpenses.
Like, medical expenses.
we have.
health savings accounts andhealth savings accounts actually
(12:29):
have among the most, generous,tax treatment, because they have
exemptions for bothcontributions and withdrawals.
But they're restricted, they'rerestricted to qualified medical
expenses or qualified healthcareexpenses.
the idea of a universal savingsaccount is that it would be
accessible.
At a shorter timeframe than aretirement account.
(12:51):
it would cover all manner.
And, and we'd be able to accessit for all manners of, of
expenses, on an immediate term,or a, you know, shorter
timeframe than, than untilretirement, than after
retirement.
and it would also not berestricted by different
categories of, of expenses,which, which many, or most of
the, other saving accounts are.
Kyle Hulehan (13:10):
And like a, like a Roth IRA or a 401k or some of
those things, it earns money onthe stock market.
is that how that works?
Right.
Alex Muresianu (13:19):
yes, you can invest the, contributions to, a
Universal savings account.
Kyle Hulehan (13:23):
Are there any cases or any countries that we
could, follow up in terms oflike, how is this successful?
Has it helped low income folks?
what have we seen there?
Alex Muresianu (13:30):
Yeah, so there actually has been, a few
examples of, universal savingsaccounts in practice in,
countries that we think of asrelatively similar to the United
States, Canada and the UnitedKingdom have introduced versions
of universal savings accountsrecently, and have seen quite
good uptake, of them, especiallyrelative to some of these
savings accounts we have formore specific purposes in the
(13:53):
United States.
And that's particularly true atlower income levels where if you
have, you know, you're able tosave some money, not much, but
some, and on top of, making youreveryday expenses you're able to
save some money, but you.
are not financially stable orcomfortable enough to be
(14:15):
confident to put it away in aindividual retirement account,
where it is effectively sort oflocked away And you also might
not want to put those savingsinto, a health savings account
or other specialized savingsaccount where it's restricted
for a specific purpose.
you want to be able to save andinvest and have the tax benefits
(14:37):
of a neutral savings accountwhere there's tax only on one
level of saving or, or one levelof consumption, you want to be
able to have access to that fairtax treatment.
But, you don't wanna lockyourself in to any one type of
expense or do you don't want tolock that money away.
Until retirement.
and so a universal savingsaccount makes the tax treatment,
(15:00):
the neutral tax treatmentbetween savings and consumption
accessible.
but it it also allows for muchmore flexibility.
And, simplicity as well.
it would make sense to replace alot of the existing savings
accounts with something like aUniversal Savings account.
the uptake would likely behigher among, lower income
households, and would also beeasier to comply with and
(15:24):
manage.
Kyle Hulehan (15:24):
I gotta say as someone who is not trying to
keep track of all of theseaccounts, I personally would
love something like this thatwould be a little bit more
simple, a little bit morestreamlined, and I think it's
something that honestly, I thinkeverybody could get on board
with.
Who doesn't want.
Their, their savings simplified.
I, I feel like this is kind ofa, left, right?
Like we can come together on isthere anything else that you
(15:47):
feel like you need to get offyour chest about Trump accounts?
Alex Muresianu (15:50):
Well, I mean, uh, I, I think this was, this
was a real missed opportunity,not only on a policy level, but
you want to talk about, catchy,patriotic branding, which we
have, Trump accounts or MAGAaccounts, which are rah rah, but
have a certain politicalvalence, who couldn't get on
board with a USA.
Kyle Hulehan (16:07):
That's true.
account.
USA baby.
Alex Muresianu (16:09):
yeah.
Kyle Hulehan (16:10):
They missed.
Ugh, dude.
Alex Muresianu (16:12):
Very disappointing.
Kyle Hulehan (16:13):
terrible.
Yeah.
It was a good chance.
And July 4th, I mean
Alex Muresianu (16:17):
it would've, yeah.
USA is on, you know, 1776.
America is made, USA is made,
Kyle Hulehan (16:26):
We did it.
Alex Muresianu (16:26):
could have been July 4th, 2025 USAs are made.
That was a missed opportunity.
Kyle Hulehan (16:31):
Yeah.
It really was.
Well, Alex, thank you for beingon the show today.
Thank you for breaking this downwith us.
And before we sign off, if youhave any burning questions, on
taxes, you can send them ourway.
You can drop a comment onYouTube and you can email us at
podcast@taxfoundation.org.
You can slide into our dms atDeduction Pod on Twitter.
Thanks for listening.
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