a column in the USA Today<\/a> that he\u2019s touting, which observes that this is a \u201cdouble-whammy, [because] those withdrawals will show up as income\u00a0on parents\u2019 income tax forms, which are used to calculate financial aid, making them look richer, and hence reducing grants.\u201d<\/p>\nMcArdle positions this as \u201cscraping the bottom of the barrel\u201d and an indicator that the administration has run out of low-hanging fruit in its quest to raise taxes without seeming to go after its favored groups. <\/p>\n
But the administration claims that they\u2019re focusing on 529 plans because, in their number-crunching, only the rich really benefit to any great degree. \u00a0Now, it may be true that the rich benefit disproportionately, because they are more likely to save, and, with their higher marginal tax rate, they receive greater benefits. \u00a0But it is still a tool that benefits the middle class, and offers tax-advantaged savings to anyone who, well, pays taxes.<\/p>\n
But, to a certain degree, you have to take them at their word. \u00a0Eliminating the tax break, or even reducing it to only defer taxes, will seriously curtail the attractiveness of these plans, especially because the plans are restricted enough already, requiring investment in state-sponsored funds rather than, as with an IRA, the fund of one\u2019s choice. \u00a0What the administration is effectively communicating is either \u201cwe don\u2019t believe middle-class families are saving for college\u201d or \u201cmiddle-class families who are saving for college, shouldn\u2019t bother\u201d \u2014 or both.<\/p>\n
Now, my earliest understanding of money management came from my parents, and went something like this: \u00a0\u201cyes, your friends are going to Disney for vacation, but we\u2019re saving, and that\u2019s better,\u201d followed by gripes that my aunt and uncle hadn\u2019t saved and were taking advantage by getting financial aid that they didn\u2019t deserve. \u00a0So maybe those lost trips to Disney color my perspective. <\/p>\n
But still: \u00a0I don\u2019t see another way to read the administration\u2019s proposal other than an abandonment of the idea that families should save for their children\u2019s college, rather than relying on government giveaways, loans, and loan forgiveness afterwards.<\/p>\n
<\/p>\n<\/body><\/html>\n","protected":false},"excerpt":{"rendered":"
On Friday, Megan McArdle opinioned on Obama\u2019s proposal to tax 529 college savings plans in the same manner as 401(k) plans \u2014 that is by taxing the money as ordinary income when it\u2019s withdrawn. \u00a0Today, Glen Reynolds has a column in the USA Today that he\u2019s touting, which observes that this is a \u201cdouble-whammy, [because] […]<\/p>\n","protected":false},"author":2209,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[61,63],"class_list":["post-84","post","type-post","status-publish","format-standard","hentry","category-uncategorized","tag-529-plans","tag-college-savings"],"yoast_head":"\n
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