JEFFERSON CITY, Mo. — After pressure from leaders of both parties, President Barack Obama dropped a proposal Tuesday made in his State of the Union address just one week ago to tax college savings accounts, also known as “529 accounts.”
Democratic Missouri State Treasurer Clint Zweifel was quick to be hesitant about the proposal, which would have changed the tax laws that apply to the savings accounts. Currently, 529s are not taxed.
“As State Treasurer I oversee MOST -Missouri’s 529 College Savings Plan. Since 2009, I have decreased costs for the average Missourian and increased access to an affordable, easy-to-use 529 plan,” Zweifel said. “Tonight, President Obama is expected to propose changes to the tax benefits of 529 plans. While the details of the President’s proposal have not yet been shared, I do not believe raising taxes on families saving for college is the right way to go. There is no question we should ease the burden on the middle class but we should not do so at the expense of their higher education savings.
“Working families need every tool they can get to successfully save for their children’s future and study after study has shown the mere presence of these accounts can positively impact the future higher education decision of a child. It is my hope President Obama and Congress will work together to find a solution that both lifts up the middle class and preserves the current tax benefits to our nation’s 529 plans.”
Administration officials claimed last week, after Obama addressed the accounts in his State of the Union, that they were looking at the 529 accounts because they unfairly benefit high-income people. Americans eventually would have had to pay taxes on the earnings when they were withdrawn under the proposed change.
A White House official told Fox News late Tuesday afternoon that the provision was a “very small component” of Obama’s plan to cut taxes for the middle class.
“Given it has become such a distraction, we’re not going to ask Congress to pass the 529 provision so that they can instead focus on delivering a larger package of education tax relief that has bipartisan support, as well as the President’s broader package of tax relief for childcare and working families,” the White House official told Fox News.
Rachael Herndon was the editor at The Missouri Times and also produced This Week in Missouri Politics, published Missouri Times Magazine, and co-hosted the #MoLeg podcast. She joined The Missouri Times in 2014, returning to political reporting after working as a campaign and legislative staffer.
Rachael studied at the University of Missouri – Columbia. She lives in Jefferson City with her husband, Brandon, and their two children.