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The Daily Signal
Your 529 Plan
Is Safe. Here’s Why the White House Changed Course.
Kate Scanlon
January 27, 2015
President Obama is abandoning his controversial plan to tax the
interest on 529 savings accounts, the White House announced Tuesday.
The 529 plans are savings accounts in which parents and families can
invest after-tax dollars. If the money is used for specified college
costs, they don’t have to pay federal tax on the interest accumulated
in these accounts.
The president’s proposal, which faced bipartisan opposition, would have
“effectively end[ed]” the plans, according to the New York Times.
“Given it has become such a distraction, we’re not going to ask
Congress to pass the 529 provision so that they can instead focus on
delivering a larger package of education tax relief that has bipartisan
support, as well as the president’s broader package of tax relief for
child care and working families,” a White House official told the New
York Times.
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Earlier on Tuesday, House Speaker John Boehner, R-Ohio, said that 529
plans “help middle-class families save for college,” and said that
taxing these accounts should not be included in the president’s budget
proposal.
Lindsey Burke, the Will Skillman fellow in education policy at The
Heritage Foundation, said that the president’s plan would have hurt
middle-class families.
“Taxing college savings accounts would have created disincentives for
those who save for college in favor of the federal government directing
college spending, lending and handouts—through proposals like ‘free’
community college and student loan ‘forgiveness,’” Burke told The Daily
Signal.
“It became clear pretty quickly that the proposal to tax college
savings accounts in no way benefited middle-income families,” Burke
added. “Families who have diligently worked to save for their
children’s college education would have been penalized under this
proposal. It seems, at least for the moment, that the administration is
dropping its quest for this bad policy.”
Corie Whalen Stephens, a spokeswoman for Generation Opportunity, said
taxing the interest on 529 plans hurts middle-class students and their
families.
“It’s encouraging to see our president respond to the needs of our
generation by dropping his ill-conceived idea to tax 529 college
savings plans. His misguided proposal, intended to fund his
unaffordable government policies, would have fallen squarely on the
backs of middle-class students and their families,” said Stephens.
She added that funding a broken system doesn’t help students.
“Finding new ways for the government to finance a failing higher
education system isn’t a solution. In fact, these endless subsidies
with no reforms attached to them are the problem. To fix this, our
leaders must look to policies that foster innovation and competition to
lower overall costs—not repackage failed big government policies,” said
Stephens.
Read this and other articles at The Daily Signal
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