Obama Drops Proposal to End Tax Benefits of 529 Savings Plans

President Obama dropped a proposal this week to cut the tax benefits of 529 college savings plans, reports The Washington Post.

White House officials said political pressure against the president's plan became "such a distraction" that it was best to drop the proposal, which would have removed the ability of families to withdraw money tax-free from the savings plans.

The administration tried to frame the proposal as a way to redirect more money to the middle class, arguing that the plans were being used disproportionately by wealthy families, the Post reported. According to the Government Accountability Office, nearly half of the families with 529 plans made more than $150,000 per year and had median assets of $413,000. But the College Savings Foundation, a nonprofit that advocates for 529s, estimates that 70 percent of account holders earn less than $150,000, and another 10 percent of account owners have income below $50,000.

About 12 million American families rely on the accounts, the Post reported. Assets in 529s have risen from $19.4 billion at the end of 2001 to $245 billion in 2014.


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The Washington Post