Posted: 6:21 pm Tuesday, January 27th, 2015
By Jamie Dupree
It’s not often you see a proposal talked about in the State of the Union Address abandoned a week later, but that’s what has happened in the case of one plan from President Obama, which would have taken away favored tax treatment for 529 college savings plans.
Republicans had denounced the original plan, and they quickly celebrated the news that the White House had backtracked.
— Speaker John Boehner (@SpeakerBoehner) January 27, 2015
“The President’s dropping his misguided plan is a victory for common sense,” said Sen. Charles Grassley (R-IA).
The original plan was part of an effort by the White House to argue that 529 savings plans were tilted in favor of higher income earners; the President’s own team had described it as an “upside-down” education savings incentive – it was described this way:
On the night of the State of the Union, the White House even tweeted out the idea that forcing the wealthy to pay capital gains taxes on college savings – to pay for other programs – was a popular idea:
— The White House (@WhiteHouse) January 21, 2015
But from the beginning, Republicans had attacked the Obama plan to limit college savings for those making over $200,000 a year, arguing that it would force many families to instead take out government loans.
“For the sake of middle class families, the President oughta withdraw this tax increase when he submits his budget,” Boehner said at a news conference.
Hours later, he got his wish.
A White House official meanwhile said it was obvious the plan lacked support.
“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,” the official said.
As word of the decision to take the 529 plan out of the President’s budget, Republican lawmakers celebrated the news.
“Good news for middle class families saving for college,” tweeted Rep. Larry Bucshon (R-IN).
I strongly urge the President to now work w/ Congress to pass my bipartisan plan to strengthen & expand 529 college savings plans. (3-3)
— Lynn Jenkins (@RepLynnJenkins) January 28, 2015
About the Author
Jamie Dupree is the Radio News Director of the Washington Bureau of the Cox Media Group and writes the Washington Insider blog. A native of Washington, D.C., Jamie has covered Congress and politics in the nation’s capital since the Reagan Administration, and has been reporting for Cox since 1989.