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President Obama to propose 2 years of free community college for all students

Glad they made this call, props to the White House.
 
BiffTannen said:
How do you abuse a 529? I mean, if you try to use the money for anything else, you get smacked with a big tax bill. Are you saying that a wealthy person funding a bunch of 529s for a number of future college students is abuse?
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Undervalue assets like Romney's done with his IRA, I'd guess. But even that would have really limited upside.
 
Super rich people like Rumney would not use 529's.

Upper middle class folks, yes.
 
2&2 Slider To Leyritz said:
Haha, no. The top 3% (though probably closer to 1-2% in this instance), who are generally paying straight cash homey for their kids' tuition out of pocket, often have the income infrastructure to grey-area deduct those expenditures, which can provide them with more avoidance of taxes than a 529 plan while not locking up the cash for years to do it. These guys are lightyears ahead of a 529 plan.
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That's true.
 
Go said:
Super rich people like Rumney would not use 529's.

Upper middle class folks, yes.
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So the top 10%.

Good piece from 538 (I don't say that often enough) on 529.

Obama’s Retreat On 529 College Savings Plans Is A Bad Omen For Tax Reform

The controversial — and now dead — proposal concerned 529 plans, investment accounts that let families save for college expenses, like tuition and books, without paying capital gains taxes when the money is withdrawn. Obama wanted to limit the tax-free withdrawals from these plans, as well as phase out another smaller college savings program, as part of a set of changes to the tax code that would, in his words, “help middle-class families.”
The 529 program is relatively small — about 7 million families use such accounts. According to a 2012 report by the Government Accountability Office, 529 plans cost the federal government about $1.6 billion in forgone tax revenue in the fiscal year 2011. These numbers are infinitesimal compared with other tax expenditures(the exemptions, deductions and credits the government effectively treats as expenditures because they limit tax revenue).
flowers-datalab-529-fail-table1.png


The lesson: If politicians (from both parties) are lobbying the president to drop his plan to simplify a program that amounts to less than $2 billion a year, then the much bigger tax expenditure programs are effectively untouchable.
That’s a problem because, as pretty much everyone agrees, the tax code is too complex. Many proposals for tax reform are modeled on the Tax Reform Act of 1986, which was able to lower tax rates by limiting tax breaks (that is, the types of tax expenditures outlined above).
But when even small tax breaks have their vociferous defenders, it’s that much harder to simplify and improve the tax code.
 
I wasn't aware I was a 10 percenter! Sweet.
 
PhDeac said:
I'd be shocked if you weren't. 90th percentile of household income is around $145K.
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Do you think people like you and me shouldn't have access to tax advantaged savings plans?
 
Liquid Karma said:
Do you think people like you and me shouldn't have access to tax advantaged savings plans?
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Don't know about PH, but i think we should have a greatly simplified tax code that lowers the overall rate of taxation, so you can get approximately the same results from your normal investments as you can from a 529 plan.
 
Liquid Karma said:
Do you think people like you and me shouldn't have access to tax advantaged savings plans?
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Esp to pay for college.

Keep in mind that almost 50% of Americans aren't paying much Federal tax if at all.
 
Liquid Karma said:
Do you think people like you and me shouldn't have access to tax advantaged savings plans?
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Weird response. Are you in the top 10% or not?

I think the tax code should be greatly simplified so everyone can benefit. 529s make the tax code more complicated.

Read the 538 piece. If 529s are off the table, good luck with any meaningful tax reform.
 
PhDeac said:
Weird response. Are you in the top 10% or not?

I think the tax code should be greatly simplified so everyone can benefit. 529s make the tax code more complicated.

Read the 538 piece. If 529s are off the table, good luck with any meaningful tax reform.
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Yes.
 
Deacon923 said:
This article is a great explainer on how 529 plans work (or don't work), who benefits the most, and the unsurprising reasons any proposal to remove a tax break that primarily benefits the wealthy is DOA. http://www.theatlantic.com/business/archive/2015/01/the-rich-the-poor-and-whether-tax-policies-live-or-die/384947/
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"To summarize: If you’re poor, a 529 plan gives you nothing, since you don’t pay income taxes in the first place; the AOTC gives you $4,000 ($5,000 under Obama’s proposal) because you can take $1,000 of the credit per year even if you pay no taxes. If you’re in the “middle class” (making at least $74,900 and able to save $3,000 per year per child), a 529 plan gives you $5,800; the AOTC gives you $10,000 ($12,500 under Obama’s proposal). If you’re in the upper class, a 529 plan gives you $26,300; the AOTC gives you nothing."
 
Liquid Karma said:
Yes.
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Of course you are. I would imagine most Wake grads in their mid to late 30s are especially in two income households.

I don't think it's a huge stretch to say those with the most who benefit the most from 529 torpedoed a plan to benefit a much larger cross-section of Americans. "Get your big government hands off my entitlements!!!"
 
PhDeac said:
Of course you are. I would imagine most Wake grads in their mid to late 30s are especially in two income households.

I don't think it's a huge stretch to say those with the most who benefit the most from 529 torpedoed a plan to benefit a much larger cross-section of Americans. "Get your big government hands off my entitlements!!!"
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I was not aware that 529 plans and subsidizing community college are mutually exclusive. No reason they can't both be available.

There are already a slew of tax advantages that I'm not given access to because of my income that are available to those who make less. I won't lose any sleep that I prefer to keep at least this one.
 
Sure, they aren't mutually exclusive, but Obama's got to pay for it somehow and somebody is going to be pissed at how he does it. And again, if you can't get past 529s, you probably won't give up the mortgage deduction or any of the big upper-middle class entitlements.
 
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