During his State of the Union address, President Obama proposed taxing 529 college savings plan. 529 tax plans work by allowing families to deposit after tax funds into an account that then accumulates interest. When funds are withdrawn from the account to pay for college they are tax free.
Almost 12 million families rely on 529 plans to help pay for the costs of college but Obama’s proposal will tax these plans like ordinary income and destroy the viability of this widely used account.
ATR’s Grover Norquist and Ryan Ellis sit down to discuss how this new proposal will hurt the ability of middle class families to invest in their children’s college education.