Author Topic: Obama wants to tax 529 plans  (Read 21528 times)

retired?

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Re: Obama wants to tax 529 plans
« Reply #50 on: January 22, 2015, 03:05:28 PM »
This is an interesting thread. I am on the fence about this issue.  I am contemplating opening a new account (before finding a partner and starting a family), so I find these proposed changes disheartening.

I wanted to ask since we are on topic, out of curiosity, how many Californian Mustachians use the 529, and if not, why?  Thanks.

I am using one, on my son's first bday some family gave some money that was to be used for a college fund so I opened a 529 through Vanguard and have been contributing to it since. I don't believe you can start one before the kid is born (you have to use a social security number of the person it is to be used for to open the account)

However you can transfer the funds to other family members... for example if you have two kids and the first gets a full ride scholarship you can transfer the funds to the second kid.
You can put it under your name and then switch it to your kid as a beneficiary when the child is born.   But since Ca has no state benefits, it is pretty useless.

Tax free gains are useless?  I've never benefitted from the state tax aspect since I chose a 529 from a different state.  But, with kids 13 and 11 both balances are about 1/3 gains.  Happy to not have that taxed at the federal level when it comes time to use the funds.

bzzzt

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Re: Obama wants to tax 529 plans
« Reply #51 on: January 22, 2015, 04:24:54 PM »
Bet you won't puke when you see your mortgage deduction in Turbo Tax - welfare for the middle classes is ok?. A lot of your post makes some sense from a personal improvement standpoint but the hypocrisy is what makes me sick, along with this country's obsession of blaming those with the least influence for everything, you seriously think the guy with the LINK card is the problem.

Actually, I do puke a little. I have a 15 year @ 3%, I paid ~$2500 in interest. So, that'll net me a grand total of... ~$625. Man, glad I had that to claim. (/sarcasm) I get more deduction for a max tIRA contribution.

The problem is not LINK, WIC, unemployment, Medicaid, etc. The problem is people getting sucked into a downward spiral of laziness, convenience, and envy. "I need help". Well, start by helping your MF'ing self.

I work construction. Construction is a cyclical industry. I was un/underemployed for ~12 months in 2009/2010. The only thing that got me back to work was the specialty/extra training I spent the time to learn BEFORE I was unemployed. We drive older cars that are paid in full, bought near the bottom of the depreciation curve. We also don't drive like idiots, so we only carry liability insurance. I finally caved in and got a smart phone, but I don't have a data plan to keep costs down. Basically, we make solid choices. We aren't totally mustachian, but we're better than most.

My wife's family is pretty much the opposite and their bad choices keep them down despite making >$80k/year. I don't mind government services helping people who honestly need a hand getting back on their feet, disabled, elderly, etc. But, I can't stand standing in line behind someone who just got their hair done and their nails did, talking on a smart phone, and paying for crap with LINK. Same goes for those guys that jus' got all lined up, wearing $300 worth of trendy clothes doing the same thing. My high school Physics teacher summed it up very eloquently: "Here's a life lesson for everyone. Don't Do Dumb Things."

"The Poor" are generally very unmustachian. FACE PUNCHES FOR ALL OF YOU!

Eric

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Re: Obama wants to tax 529 plans
« Reply #52 on: January 22, 2015, 07:04:10 PM »
But, I can't stand standing in line behind someone who just got their hair done and their nails did, talking on a smart phone, and paying for crap with LINK. Same goes for those guys that jus' got all lined up, wearing $300 worth of trendy clothes doing the same thing. My high school Physics teacher summed it up very eloquently: "Here's a life lesson for everyone. Don't Do Dumb Things."

"The Poor" are generally very unmustachian. FACE PUNCHES FOR ALL OF YOU!

http://en.wikipedia.org/wiki/Selection_bias

bzzzt

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Re: Obama wants to tax 529 plans
« Reply #53 on: January 22, 2015, 08:47:23 PM »
http://en.wikipedia.org/wiki/Selection_bias

Geez, I didn't even bring up Ronnie Raygun's "welfare queens". So, we can judge bad choices made by the rich, but not bad choices made by the poor here? Substitute "choices" for "habits" and MMM wrote about it: http://www.mrmoneymustache.com/2013/03/19/a-lifetime-of-riches-is-it-as-simple-as-a-few-habits/

Feel like debating the great financial institutions known as "The check cashing spot"? "Why don't you get a bank account?": "Are you kidding? Then my bitch ex-wife might be able to get all that back child support! Besides, I'm going to quit as soon as they start garnishing my check."... I might laugh, if it weren't so damn sad.

Working in a factory that employed a lot of temps while I was in my teenage years gave me a lot of exposure to what I didn't want out of life. C., the crackhead with a $50/day habit and a $40/day paycheck. V., the "lady's man" who liked to get drunk at lunch time (got run off for hassling women when he flashed a box cutter at a family man). J., the multi-DUI, revoked license, alcoholic machinist with about 10 teeth left who rode his bike to work... and the bar for lunch to get rid of the shakes.

As I said in my first post in this thread, most people don't need free "stuff". They need better role models, values, and life lessons. A lot of people are already on the poverty treadmill by the time they reach college age. I haven't mentioned race in any of my posts because poverty, like justice, is blind.

rosaz

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Re: Obama wants to tax 529 plans
« Reply #54 on: January 23, 2015, 11:08:28 AM »
Anyone contributing to a 529 who hasn't maxed out all tax-advantaged retirement options (401k,Roth IRA, Trad IRA) is making a poor decision. Thus this (as stated elsewhere) mostly affects the wealthy. I don't feel terribly bad for them if this is changed.

I'm curious as to why you feel that contributing to a 529 without maxing out retirement options first is always a poor decision (not disagreeing, just looking for more info)? I understand that 529's are counted as assets whereas retirement income is not, for the purposes of financial aid packages, but beyond that are there other reasons?

I'd consider myself fairly middle-class (single, income of $65k in a high COL area), and though I've not maxed out my other accounts, I invest in a 529 because my daughter will turn 18 around the time I turn 41, and I just don't think I'll manage to retire that early (I understand some people do, just don't see the math working for me). I'm not fully loading the 529, but I'd like to have some money set aside for that time, so I can try to pay for her costs upfront, without taking on debt (and I don't think I'll be able to pay-as-I-go straight out of salary, unless my salary greatly increases in the meantime).

Gin1984

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Re: Obama wants to tax 529 plans
« Reply #55 on: January 23, 2015, 11:11:57 AM »
Anyone contributing to a 529 who hasn't maxed out all tax-advantaged retirement options (401k,Roth IRA, Trad IRA) is making a poor decision. Thus this (as stated elsewhere) mostly affects the wealthy. I don't feel terribly bad for them if this is changed.

I'm curious as to why you feel that contributing to a 529 without maxing out retirement options first is always a poor decision (not disagreeing, just looking for more info)? I understand that 529's are counted as assets whereas retirement income is not, for the purposes of financial aid packages, but beyond that are there other reasons?

I'd consider myself fairly middle-class (single, income of $65k in a high COL area), and though I've not maxed out my other accounts, I invest in a 529 because my daughter will turn 18 around the time I turn 41, and I just don't think I'll manage to retire that early (I understand some people do, just don't see the math working for me). I'm not fully loading the 529, but I'd like to have some money set aside for that time, so I can try to pay for her costs upfront, without taking on debt (and I don't think I'll be able to pay-as-I-go straight out of salary, unless my salary greatly increases in the meantime).
Because, unless you live in a state that gives benefits for a 529, the others have better tax breaks than a 529.

2lazy2retire

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Re: Obama wants to tax 529 plans
« Reply #56 on: January 23, 2015, 12:35:12 PM »
alcoholic machinist with about 10 teeth left who rode his bike to work... and the bar for lunch to get rid of the shakes.

That's somewhat mustachian, no?

bzzzt

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Re: Obama wants to tax 529 plans
« Reply #57 on: January 23, 2015, 07:41:35 PM »
That's somewhat mustachian, no?

True, except he was probably over the $9/week alcohol limit before noon on Sunday.

I credit him with my former belief that anyone over the age of 16 who was riding a bike must have had a revoked license though.

After more reading on 529s, I may start one just to get the magic of compounding started and see how the government plays it.

KBecks2

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Re: Obama wants to tax 529 plans
« Reply #58 on: January 23, 2015, 07:56:29 PM »
Doesn't this idea just open the door for taxing the gains made within ROTH IRAs?  How do you like that idea, Mustachians?

johnny847

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Re: Obama wants to tax 529 plans
« Reply #59 on: January 23, 2015, 09:06:27 PM »
Doesn't this idea just open the door for taxing the gains made within ROTH IRAs?  How do you like that idea, Mustachians?
Well that's a hell of a non sequitur

bacchi

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Re: Obama wants to tax 529 plans
« Reply #60 on: January 23, 2015, 09:06:56 PM »
Doesn't this idea just open the door for taxing the gains made within ROTH IRAs?  How do you like that idea, Mustachians?

It also opens the idea of making us all employees of the Democratic National Committee. Thanks, Obama! :'(

gimp

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Re: Obama wants to tax 529 plans
« Reply #61 on: January 24, 2015, 03:14:46 PM »
Doesn't this idea just open the door for taxing the gains made within ROTH IRAs?  How do you like that idea, Mustachians?

I'm fairly non-hypocritical on this topic. Roth IRAs are just as much pork as 529s are, tax breaks for people who can live without. Of course I max mine out. Will I cry if it becomes less of an amazing deal? Not really. Hell, I might not even be able to contribute in future years without doing some weird recharacterization crap.

I am entirely for a simple sliding scale system: you earn x, you pay y. That's it.

Obviously everyone can disagree, and should. You were asking everyone and I speak for myself.

By the way, you know the experiment with monkeys and grapes? Give a monkey a grape. Flip a coin. If heads, give it a second grape. Monkey gets 1.5 grapes on average and loves this game. Now, give a monkey two grapes. Flip a coin. If tails, take a grape away. Monkey gets 1.5 grapes on average and hates this game.

I understand exactly why giving something and then taking it away will upset you. But try to be rational: in the grand scheme of things... it's not something you needed to survive, so you'll be okay.

TreeTired

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Re: Obama wants to tax 529 plans
« Reply #62 on: January 24, 2015, 07:44:29 PM »
The 529 situation is already pretty screwed up.     We are all done with ours, started whenever they first became available and made last withdrawals a couple of years ago.   The last year I was not working and our income was very low.  We were able to take full advantage of available education tax credits.   As a result of taking the tax credits some of our 529 gains became taxable!   I am not exactly sure how that happened, but the basic idea is that you can't get double tax benefits, so I was not able to take a tax credit and have tax free gains count against the same qualified education expenses.  The tax credit was worth more to me than the tax-free gain.   It just seemed really stupid to go to all that trouble and set up an account and watch it grow and then pay taxes on the gain.  The only winner was the 529 plan administrator. 

They are also a pain in the ass when the university bills you in December and you pay in January and your tax documents don't match up with your expenses.  I really can't recommend the 529 plan as a college savings vehicle.

johnny847

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Re: Obama wants to tax 529 plans
« Reply #63 on: January 24, 2015, 10:13:52 PM »
The 529 situation is already pretty screwed up.     We are all done with ours, started whenever they first became available and made last withdrawals a couple of years ago.   The last year I was not working and our income was very low.  We were able to take full advantage of available education tax credits.   As a result of taking the tax credits some of our 529 gains became taxable!   I am not exactly sure how that happened, but the basic idea is that you can't get double tax benefits, so I was not able to take a tax credit and have tax free gains count against the same qualified education expenses.  The tax credit was worth more to me than the tax-free gain.   It just seemed really stupid to go to all that trouble and set up an account and watch it grow and then pay taxes on the gain.  The only winner was the 529 plan administrator. 

They are also a pain in the ass when the university bills you in December and you pay in January and your tax documents don't match up with your expenses.  I really can't recommend the 529 plan as a college savings vehicle.
That was totally your fault. You should have read ahead in Publication 970 before planning this out.
And why should you get a double benefit?

The trick is to use the 529 funds for room and board - so long as the student is enrolled half time, this is a qualified expense for 529 money. This is not a valid expense for the federal tax credits.

StashDaddy

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Re: Obama wants to tax 529 plans
« Reply #64 on: January 26, 2015, 09:55:03 AM »
OK, I've been playing around with the Turbotax Taxcaster tool (awesome tool, by the way!) to see how this could affect people.  Yes, I realize this new "529 taxation" thing has little chance of passing anytime soon, but what can I say?  I'm a nerd and I love numbers =)

If you are low-income early retiree living off of $40k/yr in dividends/capital gains (the "MMM-lifestyle"), and you have education spending of $30k/yr, and take $30k/yr out of your 529 plan to pay for it (taxed as taxable income), it is a wash.  Your actual taxes due will be roughly the same no matter if the 529 gains are taxed or not (due to educational deductions and tax credits).

HOWEVER, if you're still working when your kids go to school, the situation is a lot different.  If you have regular taxable income of $100k, and are forced to count an additional $30k as 529 taxable income, you will pay about $7,500/yr extra in taxes. 

If you normally have $50k/yr in taxable income, you would pay around $4,000/yr extra if you had to count the extra taxable income.

I think Obama's plan is to increase the educational tax credit by an extra $500/yr, so there's that.  But it will be way offset by higher taxes if you have taxable income. 

johnny847

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Re: Obama wants to tax 529 plans
« Reply #65 on: January 26, 2015, 12:08:31 PM »
OK, I've been playing around with the Turbotax Taxcaster tool (awesome tool, by the way!) to see how this could affect people.  Yes, I realize this new "529 taxation" thing has little chance of passing anytime soon, but what can I say?  I'm a nerd and I love numbers =)

If you are low-income early retiree living off of $40k/yr in dividends/capital gains (the "MMM-lifestyle"), and you have education spending of $30k/yr, and take $30k/yr out of your 529 plan to pay for it (taxed as taxable income), it is a wash.  Your actual taxes due will be roughly the same no matter if the 529 gains are taxed or not (due to educational deductions and tax credits).

HOWEVER, if you're still working when your kids go to school, the situation is a lot different.  If you have regular taxable income of $100k, and are forced to count an additional $30k as 529 taxable income, you will pay about $7,500/yr extra in taxes. 

If you normally have $50k/yr in taxable income, you would pay around $4,000/yr extra if you had to count the extra taxable income.

I think Obama's plan is to increase the educational tax credit by an extra $500/yr, so there's that.  But it will be way offset by higher taxes if you have taxable income. 
But this can't be the way that they implement it. I mean, they can't tax the entire withdrawal - it just wouldn't make sense. The money went in after (federal) tax, and then to pay federal taxes on the entire withdrawal would be double taxation. What would make sense if they do want to take 529 withdrawals is to take the gains as normal income.
If they truly tax the entire withdrawal, then the only advantage of using a 529 would be no taxes along the way for reinvestment of dividends and interest. However, that will be far surpassed by the fact that you'd be double taxed. So at that point, nobody would use a 529.

So then, if they decide to implement it with taxation on just the gain (which is how they assess the penalty on use of 529 funds for non educational purposes), then you still have to consider that you could have invested the money in a tax efficient fund in a taxable account, such as VTSAX/VTSMX, which has not thrown off capital gains distributions since 2000 (and even then, it was minimal). And all dividends since 2004 have been qualified dividends, except for 5.65% of them in 2013.  Now obviously, you don't want to have a significant portion still invested in a US stock fund by the end of the investment horizon, when the student goes to college. But you could use VTSAX/VTSMX in your taxable account, and bonds in a 529 (since bond fund dividends are always taxed at normal rates, and they do throw off capital gains distributions on a far more regular basis) and then rebalance by selling VTSAX and putting that money in a 529. Assuming you're selling VTSAX shares that you've held for at least a year, you can do this while getting the favorable long term capital gains tax treatment. You could also just take the dividends VTSAX throws off and put it into the 529.

The scenarios that I forsee with the 529 tax, if implemented, would imply that you should either not use it at all, or only use it for bonds and just use a stock market index in your taxable. I don't think you should try to fund all of tuition with 529 money in these secnarios.

StashDaddy

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Re: Obama wants to tax 529 plans
« Reply #66 on: January 26, 2015, 12:24:08 PM »
Excellent point, thank you for the correction.  Yes, this change would basically kill the 529 plan.  So perhaps a better comparison would be to compare to college savings in a normal taxable account.  If you stash $50k away when your child is 3, and achieve 8% returns, you will have about $158k available when the child turns 18.  At a 15% LT capital gains tax rate, you will have paid about $16k in extra taxes along the way vs the current 529 plan. 

StashDaddy

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Re: Obama wants to tax 529 plans
« Reply #67 on: January 27, 2015, 06:59:30 AM »
Actually, my last comment was perhaps a bit too simplistic.  As I research it now, expenses paid with distributions from a 529 plan do not qualify for education tax credits and deductions, according to IRS guidelines.  SO, when you scrap the 529 plan, and pay for college with taxable funds, you can qualify for tax deductions that would be around $2,500/yr or so, depending on your particular tax situation.  Over a 4-year college career, that would offset $10,000 of the $16,000 in taxes that I mentioned in my previous comment. 

Still, thats $6,000 in extra taxes.  And yes, I am just a middle class engineer (not some wealthy 1%-er), and all my other middle class friends definitely stash away a couple hundred bucks per month in 529 plans for their kids.  And right now, we are all pretty much asking "WTF, Obama???"  Maybe engineers aren't part of the "middle class" anymore?  Maybe we've risen to the status of CEOs and doctors?  I don't know, haha....  =)

johnny847

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Re: Obama wants to tax 529 plans
« Reply #68 on: January 27, 2015, 07:07:36 AM »
Oh yea haha I forgot about that. And that's something I actually have to keep track of with my taxes as a graduate student. But keep in mind that if you have say $10,000 of educational expenses you pay for, then $4000 of that can be claimed for the American Opportunity credit, and the rest of the $6000 can be paid for with 529 funds. Also, 529 money can be used for room and board if the student is a full time, whereas the federal tax credits can only be used for tuition and fees.

---

One of my friends has a theory that colleges can still keep raising tuition at rates far faster than CPI because of all these tax advantaged ways to save for college. This may be a part of it, but I don't think it's a major influence. Some food for thought though.

StashDaddy

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Re: Obama wants to tax 529 plans
« Reply #69 on: January 27, 2015, 08:48:27 AM »
Pretty funny (and a bit infuriating):

Obamas Make Jumbo 529 Contribution While Pushing Repeal For Everyone Else

"Are 529 plans an evil distortion in the tax code?  If so, why did the Obamas plow nearly a quarter of a million dollars in them back in 2007?"

http://www.forbes.com/sites/ryanellis/2015/01/22/obamas-make-jumbo-529-contribution-while-pushing-repeal-for-everyone-else/

I guess the Obamas are like Al Gore (preaching to us about CO2 emissions, while living in a huge mansion and commuting the world via private jets).  Haha, you just have to laugh at politics.... 

seattlecyclone

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Re: Obama wants to tax 529 plans
« Reply #70 on: January 27, 2015, 03:57:43 PM »
You seem to be operating under the impression that it's somehow hypocritical to do the best possible tax planning for your family while at the same time arguing that certain tax breaks are generally a bad policy. I disagree. I happen to think certain tax deductions are stupid (like the mortgage interest deduction, preferential tax rates for dividend income, the first-time homebuyer credit that was available a few years ago, and more), but I still claim them when it's to my advantage to do so.

In other news, President Obama is dropping the 529 proposal.

StashDaddy

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Re: Obama wants to tax 529 plans
« Reply #71 on: January 27, 2015, 05:51:07 PM »
Interesting, thanks for the link.  Well, i guess that about wraps up this thread. 

CanuckExpat

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Re: Obama wants to tax 529 plans
« Reply #72 on: January 27, 2015, 06:03:30 PM »
Interesting, thanks for the link.  Well, i guess that about wraps up this thread.

We could have saved everyone two pages of arguing and just posted this link originally: ‘Well, Here’s What Won’t Pass,’ Obama Says Before Listing 35 Proposals

trailrated

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StashDaddy

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Re: Obama wants to tax 529 plans
« Reply #74 on: January 28, 2015, 01:01:39 PM »
Pretty funny article from The Onion there =)

2lazy2retire

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Re: Obama wants to tax 529 plans
« Reply #75 on: January 29, 2015, 12:17:38 PM »
Pretty funny (and a bit infuriating):

Obamas Make Jumbo 529 Contribution While Pushing Repeal For Everyone Else

"Are 529 plans an evil distortion in the tax code?  If so, why did the Obamas plow nearly a quarter of a million dollars in them back in 2007?"

http://www.forbes.com/sites/ryanellis/2015/01/22/obamas-make-jumbo-529-contribution-while-pushing-repeal-for-everyone-else/

I guess the Obamas are like Al Gore (preaching to us about CO2 emissions, while living in a huge mansion and commuting the world via private jets).  Haha, you just have to laugh at politics....

I like this - did not know you can jumbo in $250k  and have it grow tax free

2lazy2retire

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Re: Obama wants to tax 529 plans
« Reply #76 on: January 29, 2015, 12:25:05 PM »
Bet you won't puke when you see your mortgage deduction in Turbo Tax - welfare for the middle classes is ok?. A lot of your post makes some sense from a personal improvement standpoint but the hypocrisy is what makes me sick, along with this country's obsession of blaming those with the least influence for everything, you seriously think the guy with the LINK card is the problem.

Actually, I do puke a little. I have a 15 year @ 3%, I paid ~$2500 in interest. So, that'll net me a grand total of... ~$625. Man, glad I had that to claim. (/sarcasm) I get more deduction for a max tIRA contribution.

The problem is not LINK, WIC, unemployment, Medicaid, etc. The problem is people getting sucked into a downward spiral of laziness, convenience, and envy. "I need help". Well, start by helping your MF'ing self.

I work construction. Construction is a cyclical industry. I was un/underemployed for ~12 months in 2009/2010. The only thing that got me back to work was the specialty/extra training I spent the time to learn BEFORE I was unemployed. We drive older cars that are paid in full, bought near the bottom of the depreciation curve. We also don't drive like idiots, so we only carry liability insurance. I finally caved in and got a smart phone, but I don't have a data plan to keep costs down. Basically, we make solid choices. We aren't totally mustachian, but we're better than most.

My wife's family is pretty much the opposite and their bad choices keep them down despite making >$80k/year. I don't mind government services helping people who honestly need a hand getting back on their feet, disabled, elderly, etc. But, I can't stand standing in line behind someone who just got their hair done and their nails did, talking on a smart phone, and paying for crap with LINK. Same goes for those guys that jus' got all lined up, wearing $300 worth of trendy clothes doing the same thing. My high school Physics teacher summed it up very eloquently: "Here's a life lesson for everyone. Don't Do Dumb Things."

"The Poor" are generally very unmustachian. FACE PUNCHES FOR ALL OF YOU!

Enjoy the Super Bowl - FREELOADER

http://www.marketwatch.com/story/this-is-how-your-tax-dollars-paid-for-the-super-bowl-2015-01-29

Dollarbill49

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Re: Obama wants to tax 529 plans
« Reply #77 on: January 29, 2015, 01:01:22 PM »
You had me till I seen FOX "NEWS"

So here are links from Forbes and the WSJ,

can you have a constructive argument on the propsal now 2lazy2retire, or is it still a non issue because Fox covered the story as well?

http://www.forbes.com/sites/ryanellis/2015/01/21/obamas-529-college-savings-plan-tax-hike-is-an-assault-on-the-american-dream/

http://www.wsj.com/articles/obama-proposal-to-cut-529-plan-tax-benefits-meets-opposition-1421811117

I have a game I play with our kids - turn on Faux News and count how long it runs before someone says Obama - funny how often we fail to get past 60 seconds - try it.

Well, he is the president after all and it is a political news channel.  Would you rather they mention Romney more often?

2lazy2retire

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Re: Obama wants to tax 529 plans
« Reply #78 on: January 30, 2015, 11:31:13 AM »
You had me till I seen FOX "NEWS"

So here are links from Forbes and the WSJ,

can you have a constructive argument on the propsal now 2lazy2retire, or is it still a non issue because Fox covered the story as well?

http://www.forbes.com/sites/ryanellis/2015/01/21/obamas-529-college-savings-plan-tax-hike-is-an-assault-on-the-american-dream/

http://www.wsj.com/articles/obama-proposal-to-cut-529-plan-tax-benefits-meets-opposition-1421811117

I have a game I play with our kids - turn on Faux News and count how long it runs before someone says Obama - funny how often we fail to get past 60 seconds - try it.

Well, he is the president after all and it is a political news channel.  Would you rather they mention Romney more often?

Don't care - it was somewhat entertaining with hopefully a lesson in there not to believe most of what you hear on the news, I also have them watch RT by way of balance.

joer1212

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Re: Obama wants to tax 529 plans
« Reply #79 on: February 22, 2015, 10:50:50 AM »

President Obama used his State of the Union address Tuesday night to tout “middle-class economics” – including tax breaks for child care and free community college.

But while it went unmentioned in his speech, the White House also is proposing rolling back a vital tax break for college savings plans that directly impacts the middle class.

The proposal would change the tax treatment of so-called 529 plans, which allow college savings to grow tax-free. Under the change, Americans eventually would have to pay taxes on the earnings when they’re withdrawn.

http://www.foxnews.com/politics/2015/01/21/as-obama-urges-middle-class-help-also-calls-for-ending-vital-college-tax-break/

THE #1 rule governing ALLother rules should be that government cannot change the rules of the game after you have already started to play. In other words, once you start contributing to a Roth IRA, you should be grandfathered in with the rules that were in effect at the time you made your first contribution. The government should not be allowed to capriciously engage in slimy bait-and-switch tactics, like the current proposals would do. This is not only unethical, it is mathematically wrong-- like saying that, from now on, 2+3= 6.

joer1212

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Re: Obama wants to tax 529 plans
« Reply #80 on: February 22, 2015, 10:52:54 AM »

President Obama used his State of the Union address Tuesday night to tout “middle-class economics” – including tax breaks for child care and free community college.

But while it went unmentioned in his speech, the White House also is proposing rolling back a vital tax break for college savings plans that directly impacts the middle class.

The proposal would change the tax treatment of so-called 529 plans, which allow college savings to grow tax-free. Under the change, Americans eventually would have to pay taxes on the earnings when they’re withdrawn.

http://www.foxnews.com/politics/2015/01/21/as-obama-urges-middle-class-help-also-calls-for-ending-vital-college-tax-break/

THE #1 rule governing ALLother rules should be that government cannot change the rules of the game after you have already started to play. In other words, once you start contributing to a Roth IRA, you should be grandfathered in with the rules that were in effect at the time you made your first contribution. The government should not be allowed to capriciously engage in slimy bait-and-switch tactics, like the current proposals would do. This is not only unethical, it is mathematically wrong-- like saying that, from now on, 2+3= 6.

President Obama used his State of the Union address Tuesday night to tout “middle-class economics” – including tax breaks for child care and free community college.

But while it went unmentioned in his speech, the White House also is proposing rolling back a vital tax break for college savings plans that directly impacts the middle class.

The proposal would change the tax treatment of so-called 529 plans, which allow college savings to grow tax-free. Under the change, Americans eventually would have to pay taxes on the earnings when they’re withdrawn.

http://www.foxnews.com/politics/2015/01/21/as-obama-urges-middle-class-help-also-calls-for-ending-vital-college-tax-break/

THE #1 rule governing ALL other rules should be that government cannot change the rules of the game after you have already started to play. In other words, once you start contributing to a savings plan, you should be grandfathered in with the rules that were in effect at the time you made your first contribution. The government should not be allowed to capriciously engage in slimy bait-and-switch tactics, like the current proposals would do. This is not only unethical, it is mathematically wrong-- like saying that, from now on, 2+3= 6.

joer1212

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Re: Obama wants to tax 529 plans
« Reply #81 on: February 22, 2015, 10:55:07 AM »

President Obama used his State of the Union address Tuesday night to tout “middle-class economics” – including tax breaks for child care and free community college.

But while it went unmentioned in his speech, the White House also is proposing rolling back a vital tax break for college savings plans that directly impacts the middle class.

The proposal would change the tax treatment of so-called 529 plans, which allow college savings to grow tax-free. Under the change, Americans eventually would have to pay taxes on the earnings when they’re withdrawn.

http://www.foxnews.com/politics/2015/01/21/as-obama-urges-middle-class-help-also-calls-for-ending-vital-college-tax-break/

THE #1 rule governing ALL other rules should be that government cannot change the rules of the game after you have already started to play. In other words, once you start contributing to a savings plan, you should be grandfathered in with the rules that were in effect at the time you made your first contribution. The government should not be allowed to capriciously engage in slimy bait-and-switch tactics, like the current proposals would do. This is not only unethical, it is mathematically wrong-- like saying that, from now on, 2+3= 6.

johnny847

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Re: Obama wants to tax 529 plans
« Reply #82 on: February 22, 2015, 11:07:25 AM »

President Obama used his State of the Union address Tuesday night to tout “middle-class economics” – including tax breaks for child care and free community college.

But while it went unmentioned in his speech, the White House also is proposing rolling back a vital tax break for college savings plans that directly impacts the middle class.

The proposal would change the tax treatment of so-called 529 plans, which allow college savings to grow tax-free. Under the change, Americans eventually would have to pay taxes on the earnings when they’re withdrawn.

http://www.foxnews.com/politics/2015/01/21/as-obama-urges-middle-class-help-also-calls-for-ending-vital-college-tax-break/

THE #1 rule governing ALL other rules should be that government cannot change the rules of the game after you have already started to play. In other words, once you start contributing to a savings plan, you should be grandfathered in with the rules that were in effect at the time you made your first contribution. The government should not be allowed to capriciously engage in slimy bait-and-switch tactics, like the current proposals would do. This is not only unethical, it is mathematically wrong-- like saying that, from now on, 2+3= 6.
Not sure why you triple posted this, but...

I agree with you that it would be unethical. But I do not understand where you get this idea that it is mathematically wrong.
Mathematics is simply built on a set of "non-logical axioms." We assert certain things are true, such as a+b = b+a. From our set of axioms we build the entirety of mathematics.

There is nothing axiomatic about laws established by the government. We know full well that the government has the power to change the law.

MrMonkeyMustache

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Re: Obama wants to tax 529 plans
« Reply #83 on: February 22, 2015, 11:30:05 AM »
Not from the US so I don't know details, but is it possible that this tax-advantage is just inflating the cost of education? We don't have any similar system where I live, but there has been a lot of discussion about the interest deduction you can make when you have a mortgage. It has been argued that this extra money is just inflating housing costs, because it enables everyone to pay more.

Has this been discussed in the US? I know you guys are having problems with the rising cost of education.

johnny847

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Re: Obama wants to tax 529 plans
« Reply #84 on: February 22, 2015, 11:39:22 AM »
Not from the US so I don't know details, but is it possible that this tax-advantage is just inflating the cost of education? We don't have any similar system where I live, but there has been a lot of discussion about the interest deduction you can make when you have a mortgage. It has been argued that this extra money is just inflating housing costs, because it enables everyone to pay more.

Has this been discussed in the US? I know you guys are having problems with the rising cost of education.
It's certainly something that I have discussed with my friends as a possibility. I'm not aware of any studies on the matter though

Gin1984

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Re: Obama wants to tax 529 plans
« Reply #85 on: February 22, 2015, 11:47:52 AM »
Not from the US so I don't know details, but is it possible that this tax-advantage is just inflating the cost of education? We don't have any similar system where I live, but there has been a lot of discussion about the interest deduction you can make when you have a mortgage. It has been argued that this extra money is just inflating housing costs, because it enables everyone to pay more.

Has this been discussed in the US? I know you guys are having problems with the rising cost of education.
If you just look at private universities they are increasing on average about 5%, a decent but not insane amount, however the public universities are growing at huge amount because not only are the costs increasing but the state governments were cutting the subsidizes to the universities.  It also used to be that you would not go to universities without basic skills but now students are graduating without knowing how to write well.  My English 1A course (ten years ago) said on the first day that we would be writing one long paper per week (this was a summer course).  Guess how long it was?  Five pages.  We were writing that in high school.  My major paper senior year of high school was over thirty pages and included a oral presentation.  Therefore we have required courses which should not be required, transfer courses for community college that end up increasing time in school (to transfer it took me three full years of courses and my upper division classes required 2.5 years of full time).   In addition some courses can only be offered in once a year because of cuts and you have a serious mess.  To fix our college system would require fixing our K-12 system.