President Obama Drops Plan To Raise Taxes On 529 College Savings Plans
[guest post by Dana]
How great if any proposed tax increase became “such a distraction” that it, too, was abandoned:
President Obama on Tuesday abandoned a proposal to end a major tax benefit of popular college savings accounts used by millions of American families after the White House faced mounting criticism from lawmakers and parents.
White House officials said the backlash against the president’s plan became “such a distraction” that it was best to drop the proposal, which would have removed the ability of families to withdraw money tax-free from the savings plans, known as 529s.
The administration had tried to frame the elimination of the tax break as a way to redirect more money to middle-class families, arguing that the savings plans were being used disproportionately by wealthy families.
But the proposal proved to be a serious political miscalculation. With more than $1 trillion of outstanding student debt in this country, the 529 plan has become one of the best tools for families to save for college. About 12 million American families rely on the accounts.
Not even Democrats like Sen. Charles E. Schumer, House Minority Leader Nancy Pelosi or Rep. Chris Van Hollen were on board with the idea floated during the president’s SOTU address. The White House will instead pursue a plan that provides “education tax relief” with bipartisan support.
–Dana
UPDATE BY PATTERICO: I put up a post on this before I saw Dana had done one, so I’ll throw in my two cents here. Which is:
Duh. “Close to 10 percent of 529 account holders have incomes below $50,000, and more than 70 percent of the total number of accounts are owned by households with incomes below $150,000.” It was an attack on the middle class, and why was that fact was not front and center in the GOP SOTU response? Because the GOP is incompetent.
Hello.
Dana (8e74ce) — 1/28/2015 @ 6:57 amYup. And that was the plan all along. He needed the sexy 529 soundbite for the SOTU and to temporarily bump up his Rasmussen approval numbers among the clueless. Done and done.
elissa (c56eee) — 1/28/2015 @ 7:03 amIf ever there were a program to benefit the middle class, the 529 program is it. Poor students receive scholarships and the super wealthy use tax deductible margin loans or simply pay cash. Obama’s desire to eliminate tax deductibility on 529s is more likely a foot in the door to eliminate tax deductibility on IRA and 401K gains.
That is the tax spigot Democrats drool over.
Corky Boyd (5a6d03) — 1/28/2015 @ 7:08 amBipartisan anything is a recipe for disastrous results.
JD (86a5eb) — 1/28/2015 @ 7:11 amSerious thought goes into every one of these trial balloons.
Racists.
DNF (c709a1) — 1/28/2015 @ 7:26 amPatterico:
The GOP response has been platitudinous crap since forever. They go out of their way to avoid any sharp edges, lest someone think they have a message to carry. This was no different. They all sound like they were written by a committee of PR flacks then massaged to death by a committee of lawyers. Boring from the word go.
Next time they should let 10 Senators, picked at random, respond with 2 minutes each, off the cuff.
Kevin M (25bbee) — 1/28/2015 @ 8:16 amSuggested starting words for the next SOTU response: “What a pack of lies!”
Kevin M (25bbee) — 1/28/2015 @ 8:18 amAm I wrong that GOP response was prepared before SOTU speech was released and that taxing 529’s was not part of slow leak of SOTU talking points the weekend before?
Bueller?
daleyrocks (bf33e9) — 1/28/2015 @ 9:19 ammaybe it’s more better if you put your college savings into bread bags instead of these 529 things anyway
happyfeet (a037ad) — 1/28/2015 @ 9:23 amdaleyrocks,
I don’t know when the GOP prepared its response to the SOTU but Forbes reported the Administration leaked the 529 tax idea late Saturday before Obama’s State of the Union address on Tuesday night.
DRJ (a83b8b) — 1/28/2015 @ 9:30 am“I don’t know when the GOP prepared its response to the SOTU but Forbes reported the Administration leaked the 529 tax idea late Saturday before Obama’s State of the Union address on Tuesday night.”
DRJ – Thanks. I did not recall anybody squawking about it over the weekend. Since the SOTU, though, I think the opposition has been bipartisan.
daleyrocks (bf33e9) — 1/28/2015 @ 10:38 amPolitico, after making up a quote from F@ckabee which he never said, then credited the Dems with scuttling this idea.
JD (86a5eb) — 1/28/2015 @ 10:42 amDRJ – Found it. The White House stuck it in two lines of larger late Saturday night of a three day weekend release. Not surprising there was not that much noise ahead of time.
http://www.forbes.com/sites/ryanellis/2015/01/19/obamas-new-state-of-the-union-tax-hike-on-middle-class-529-college-savers/
daleyrocks (bf33e9) — 1/28/2015 @ 10:47 amAm I wrong that GOP response was prepared before SOTU speech was released and that taxing 529′s was not part of slow leak of SOTU talking points the weekend before?
Bingo. One big problem with the “response” to the SOTU is that it isn’t really a response, it’s a pre-written alternative SOTU from the opposition party. Neither party has the guts or the imagination to have an actual “response” which they would deliver live and off-the-cuff, so we get a useless speech from the President followed up by a useless speech from the opposition. That’s why I am proud to say that I have watched a SOTU in probably 10 years. A complete waste of time from the city that has made wasting time into an art form.
JVW (27e4a7) — 1/28/2015 @ 11:30 am