A Terrible, Horrible, No Good, Very Bad Idea


Taxing Section 529 tax-free education plans is a terrible, horrible, no good, very bad idea.

Of all the lying, broken campaign promises,and studied burglary President Obama has committed over the past six years—seven really, if you count his first campaign—this has to be the worst.


He who can’t help but toot his own horn (tooting his horn was his only moment of clarity in the whole State of the Union Speech), said this last night:

Of course, the education race doesn’t end with a high school diploma. To compete, higher education must be within the reach of every American. (Applause.) That’s why we’ve ended the unwarranted taxpayer subsidies that went to banks, and used the savings to make college affordable for millions of students. (Applause.) And this year, I ask Congress to go further, and make permanent our tuition tax credit — worth $10,000 for four years of college. It’s the right thing to do. (Applause.)

There were sixty (count’em: six-oh) pauses for applause in his speech, mostly because the Left would applaud if Obama said he was appointing Jerry Sandusky to the Supreme Court, or if he revealed himself as a Sith Lord and reorganized the Republic into the First Galactic Empire.  But let’s unpack what Palpatine Obama said here: “ended unwarranted taxpayer subsidies” means “raised taxes on everyone who actually pays taxes”, and “go further” means this:

Tonight, in his State of the Union address, President Obama will propose a series of tax increases on the American people. One of these tax increases is indisputably an income tax hike on middle class families with children.

Under Obama’s plan, earnings in “Section 529” (named for its location in the Internal Revenue Code) college savings plans will face full income taxation upon withdrawal.


There’s approximately $252 billion held in “Section 529” plans, mostly by middle class families—like mine.  When each of my two boys was born, we opened a Texas College Savings Plan 529 account for them, and seeded it.  We, in fact, put a significant portion of our nest egg money into their education, so that when they grow up, they can attend the college of their choice, no worries—and we continue to fund those accounts every month.  What Obama is saying is he’d like to tax the several hundred thousand dollars of earnings those accounts will accrue over the years, after the government has already taxed the income used to fund them.

Talk about broken promises; this one is literally stripping the bark off the tree of life.  Taxing $200 billion in order to waste the money on sinkholes like free community college.  It’s nothing more than a taking—taking from those who worked for the money to give it to those who sucked up for it.  The White House says that they’d grandfather current 529 accounts, but once Congress smells money, it’s like a shark finding blood in the water.

It’s likely under Republican leadership, the House and Senate will oppose this really bad, bad, terrible awful idea.  That’s a good thing.  Playing bait and switch with our children’s education savings to pay for kids who could obtain other forms of student aid is plain stupid.  Obama simply wants to make community college into high school, so kids have another two years to learn what they couldn’t in four.


“It’s a tax increase to middle-class families that are using 529 plans to save for their kids’ education,” said [mc_name name=’Rep. Lynn Jenkins (R-KS)’ chamber=’house’ mcid=’J000290′ ] (R., Kan.). “The president is essentially forcing many middle-class families into a huge federal program to attend community college.”

The best indicator that this is a terrible idea is liberals like Jordan Weissmann at Slate love it.

I don’t know about you, but I generally don’t think that our higher education policy should be geared toward helping families that earned $150,000 or more send their kid to the most expensive possible school. Meanwhile, the White House says that revenue brought in from taxing gains in 529 plans would go toward expanding other higher education tax breaks, such as the American Opportunity Tax Credit, which is available to families earning up to $180,000. So it seems like the middle class makes out just fine in this deal.

I know about me, and I think the money I paid taxes on and invested in a tax free education plan should remain tax free.  I’m middle class, and I don’t think I’ll “make out just fine” losing up to 30% of the value of those savings accounts.  I’m pretty sure most parents would agree with me.


Dang socialists have got my blood pressure up now.  If only Obamacare paid for Liberal-induced hypertension.


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