Pres. Obama wants to increase taxes on savings for college. But something is happening in Congress.
… So last month, when President Obama proposed taxing 529 plans, people were understandably outraged.
Why would we make saving for college even harder? We talk all the time about rewarding people who work hard and play by the rules — well, that’s what 529 plans are. They empower families to set up accounts for their children — right from when they’re born — and then down the line they can use that money — tax-free — on books, fees, tuition, and room-and-board.
All told, there are nearly 12 million of these accounts open in all 50 states. That’s up from 1 million accounts in 2001. Why would we stop that growth? So the government can take even more of the money we’ve worked so hard to put away?
Thankfully, after a public outcry, the president was forced to drop the idea.
But we can do more. With all the challenges middle-class families are facing right now, we need to make it easier — not harder — to save.
That’s why the House acted this week to expand and modernize 529 plans.
Our plan will do a few simple things.
First, to adapt to the times, we clarify that computers are qualified expenses under 529 accounts. Second, we remove unnecessary paperwork burdens for the administrators of these plans.
And third, we allow families to re-deposit refunds from colleges without taxes or penalties. This might be useful if something happens and a student has to withdraw early for an illness. It’s just good peace of mind to have.
I’m pleased to report that the bill passed with more than 400 votes. Now we just need President Obama to help us get this done. Together, let’s make sure that 529 plans will be there for middle-class families for years to come.