Punish the responsible while enabling the irresponsible.
President Obama announced almost two weeks ago that he intended to pay for two “free” years of junior college for everyone. No, not out of his own pocket — he’ll tax the college savings plans of those people who are paying for college themselves.
While liberals were ecstatic, conservatives mocked the proposal and wondered how he would go about financing it.
Wonder no more. The president will be announcing a new tax package at his State of the Union address Tuesday, including $320 billion in tax hikes. Buried within his proposal is this item picked up by Americans for Tax Reform:
Tax Increase on Families Saving for College
Under current law, 529 plans work like Roth IRAs: you put money in, and the money grows tax-free for college. Distributions are tax-free provided they are to pay for college.
Under the Obama plan, earnings growth in a 529 plan would no longer be tax-free. Instead, earnings would face taxation upon withdrawal, even if the withdrawal is to pay for college. This was the law prior to 2001.
That’s right. It’s another wealth redistribution scheme. The people who have been scrimping, saving and planning ahead for college expenses will foot the bill for those who didn’t.