Part of President Barack Obama’s ambitious tax reform plan is a proposal to gut the popular 529 savings accounts used by millions of Americans to save for college. The administration has labeled the plans “inefficient” and complained that the benefit accrues too heavily towards higher-income Americans.
But in 2006, Obama actually voted in the U.S. Senate to make the 529 savings permanent, and has written favorably of the plans in the past.
The bill in question was the Pension Protection Act of 2006, which perpetuated a tax benefit that was originally created in the 2001 Bush tax cuts. The bill was overwhelmingly approved, but several Democrats did oppose it, including Senator Barbara Boxer.
Ryan Ellis, the tax policy director with right-leaning nonprofit Americans for Tax Reform, said it’s no surprise that Obama voted to preserve the plans back then.
“Presumably, he saw a lot of virtues with [529 plans],” Ellis told The Daily Caller News Foundation. “He spoke about them quite favorably in his autobiography.”
In “The Audacity of Hope,” while talking about the struggles of Americans to attend college, Obama praised tax-free savings accounts as a way to help control rising college costs.
We “still need to provide many students and parents with more direct help in meeting college expenses, whether through grants, low-interest loans, tax-free educational savings accounts, or full tax deductibility of tuition and fees,” Obama wrote in 2006. He then criticized Congress for “moving in the opposite direction” on the issue.
Under current tax policy, earnings off money invested in a 529 plan (named for the relevant section of the tax code) will not be taxed upon withdrawal, as long as the money is used to pay for college education. According to the College Savings Plans Network, such plans are popular, with over 12 million children from 7 million households benefiting. In some states, the government will even match contributions up to a certain amount in order to encourage their use.
Among those 12 million beneficiaries are Malia and Sasha Obama, as the president used the proceeds from The Audacity of Hope to put away $120,000 for each of the girls’ educations.
Now, the Obama administration wants to kill the plans by having them be subject to ordinary taxation.
“He profited handsomely from that book, [and] he did the right thing by taking that money and investing some of it in his daughters’ futures,” Ellis said. Obama’s proposed reform, he noted, wouldn’t offer the same chance to future American parents, but would preserve his own tax benefits.
“It’s like he rides up into the castle and pulls up the drawbridge behind him,” said Ellis.Facebook, Google Plus, & Twitter. You can also get Freedom Outpost delivered to your Amazon Kindle device here.