After a discussion between President Obama, House Speaker John Boehner and House Minority Leader Nancy Pelosi on Tuesday, January 28, the White House announced that the Obama Administration has decided to continue the 529 tax break for college savings plans that has been in existence since 2001.
“This tax would have hurt middle-class families already struggling to get ahead,” House Speaker John Boehner of Ohio said in a statement.
Originally, President Obama had planned to end it because studies show that only 3 percent of Americans use college savings accounts. He also had a larger tax credit package designed for providing lower and middle class families who use take the 529 tax break with alternatives like the American Opportunity Tax Credit that he spoke about during the State of the Union last week.
The reason for his change of heart?
The Obama Administration received a lot of backlash from politicians on both sides of the aisle and parents who are saving for their children’s educations. Critics argue that 3 percent of Americans is still a high number and that the proposed alternatives weren’t enough. Additionally, they countered that ending the break would essentially result in a tax hike for the many middle-class workers who depend upon it.
Representative Lynn Jenkins, a Kansas Republican, said in a statement, “Clearly, the president was pressured from both sides of the aisle not to go forward with his horribly misguided proposal to tax an extremely popular college savings tool for middle-class families.”
Representatives of the Democrat and Republican parties have another plan in the works.
Obama tax 529
Obama Drops Plan to Raise Taxes on ‘529’ College Savings Accounts