◼ Obama adviser defends proposal to tax college savings plans - Washington Examiner
Obama's proposal, introduced before Tuesday's State of the Union Address, would tax withdrawals from the college savings plans created under section 529 of the tax code, and expand other tax incentives for college-goers.
Chairman of the White House Council of Economic Advisers Jason Furman defended the change in an interview with Bloomberg News Friday, saying that the president's plan as a whole created more tax savings for college than it took away with the section 529 plan.
◼ Tax Benefits of College-Savings Plans Would Be Cut by Obama - Wall St Journal
◼ Obama wants to start taxing 529 college savings withdrawals, but only after exempting his own - Dan Calabrese/Herman Cain
One of the less talked-about proposals President Obama offered this week was to take away the tax-exempt status of 529 college savings plans. These very popular plans allow parents to defer income - before it's taxed - into savings accounts to then be withdrawn, also tax-free, to use for qualified college expenses.
I'll dispense for the moment with the larger question of whether stuff like this represents a wise overall approach to the tax code (it doesn't) and just focus on the particular change Obama wants to make. That is: He wants to start taxing the withdrawals parents make from their 529 accounts when it's time to pay for college, so there would be far less reward for socking that money away in the first place. But the federal government would get to confiscate more capital from the private sector! The Democrat dream is fulfilled every time a dollar goes from private hands to politicians' hands.
But here's the kicker: The Obamas themselves have already put more than $240,000 into a 529 account. So they'll now have to pay the tax, right?
No, sillies. Obama only wants the government to tax withdrawals of funds deposited after the change is made. So those who have already made the deposits - like him - can still withdraw them tax-free. Nice, huh?
