Tuesday, January 27, 2015

Where's the outrage?

I've been surprised at the passive response to the President's proposal to push 529 plans back into the taxable arena. IBD offers a mild pushback here. I haven't been able to find the fine print on this proposal, but most of the coverage suggests that taxation of earnings would be limited to new contributions only.

That would be a bookkeeping nightmare, wouldn't it?

Somehow, "progressives" are always shocked to discover that, after they push marginal tax rates ever higher, the "rich" get a disproportionate benefit from tax breaks such as 529 plans. I guess that's because math is hard.  But that was the essence of the rationale for this proposal.

Given the catastrophe of student loan debt, isn't it folly to attack the one path that is successfully accumulating capital for higher education?  The effect of the Obama proposal would be to freeze contributions to 529s, so existing accumulations would be drawn down over a generation. Except that some sources suggest that some plans could fall below critical mass long before that time.

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