Capitol Report: Obama’s Tax on College Savings Gets An ‘F’
In last week’s State of the Union speech, President Obama unveiled a plan to offer “free” community college. As we know, however, nothing in life is free; everything is paid for or earned somewhere along the line and the president’s plan was no different. The ones targeted to cover the cost of this “free” idea were hard-working Americans who would be forced to foot the bill with a new tax on their 529 college savings plans. The president and some of my colleagues in Washington seem to be completely out of touch with what it takes to pay for college today. The proposal by the president to tax parents and grandparents trying to pay for their children’s education, consequently increasing the cost of college, was reprehensible.
These 529 plans were developed to help families set aside post-tax money to pay for their children’s future college expenses. Almost 15 years ago, the plan was improved to allow invested money to grow and be used tax-free. According to the College Savings Plans Network, in the first year the plan was made tax-free, the number of accounts doubled from 2.4 million to 4.4 million. Imposing a new tax would punish folks for planning ahead for their children’s education.
The folks using these plans are not rich; they are hard-working, middle-class parents and grandparents. They have seen the cost of a four-year college degree rise more than 250 percent in the last 30 years and therefore know it is increasingly important to begin saving for college early. Today, there are nearly 12 million 529 savings accounts across the country, and they have an average balance of $21,000. That’s almost enough to cover one year at Missouri S&T. At a time when students are graduating from college with an average of $30,000 in student loan debt, we should be encouraging more families to save now instead of borrow later.
Personally, I am one of the few members of Congress still paying off my own student loans. I understand how expensive college is, how difficult it is to pay for an education, and I understand how important it is to save for college. Therefore, when the president proposed taxing these 529 college savings plans I was outraged. I stood up to the White House and demanded the proposed tax increase on middle-class families be stripped from the budget. Only after people from both parties cried foul did the president relent and decide not to further pursue this disastrous idea.
Protecting Americans’ 529 plans from a tax hike was a big win. Those who save to pay for education, instead of relying on the government, should be rewarded not punished. The benefits of college savings plans should be guarded while we continue to work toward real solutions that stem the cost of college tuition. You work hard for your money, and I’m working hard to protect it.