The Money Mustache Community

Other => Off Topic => Topic started by: StashDaddy on January 21, 2015, 01:35:01 PM

Title: Obama wants to tax 529 plans
Post by: StashDaddy on January 21, 2015, 01:35:01 PM

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 Under the change, Americans eventually would have to pay taxes on the earnings when they’re withdrawn.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/
Title: Re: Obama wants to tax 529 plans
Post by: 2lazy2retire on January 21, 2015, 01:44:51 PM
You had me till I seen FOX "NEWS"
Title: Re: Obama wants to tax 529 plans
Post by: Gin1984 on January 21, 2015, 01:45:45 PM
Ok, and? 
Title: Re: Obama wants to tax 529 plans
Post by: StashDaddy on January 21, 2015, 01:49:13 PM
It could have a pretty large effect on Mustachians' financial planning, thats all.

Here's the actual wording from the White House press release:

Limit upside-down education savings incentives and consolidate them into a single benefit. The President’s plan would consolidate education savings incentives into one vehicle and redirect the savings into the better targeted AOTC. Specifically, the President’s plan will roll back expanded tax cuts for 529 education savings plans that were enacted in 2001 for new contributions, and – like Chairman Camp’s tax reform plan – repeal tax incentives going forward for the much smaller Coverdell education savings program.

http://www.whitehouse.gov/the-press-office/2015/01/17/fact-sheet-simpler-fairer-tax-code-responsibly-invests-middle-class-fami
Title: Re: Obama wants to tax 529 plans
Post by: retired? on January 21, 2015, 01:53:26 PM
You bet he does!  The U.S. of A. is the most unfair place in the world.  Need to equalize.

Slippery slope when you start taxing tax-shielded plans.  If he or his ilk were in office long enough, you could expect a call to tax ROTH plans.

From article:

But administration officials claim they are going after the 529 accounts because they unfairly benefit high-income people.

Not from Fox News:

http://www.whitehouse.gov/the-press-office/2015/01/17/fact-sheet-simpler-fairer-tax-code-responsibly-invests-middle-class-fami

Limit upside-down education savings incentives and consolidate them into a single benefit. The President’s plan would consolidate education savings incentives into one vehicle and redirect the savings into the better targeted AOTC. Specifically, the President’s plan will roll back expanded tax cuts for 529 education savings plans that were enacted in 2001 for new contributions, and – like Chairman Camp’s tax reform plan – repeal tax incentives going forward for the much smaller Coverdell education savings program.

----------------------Fox News is no more biased than the mainstream media (both are fairly biased.....Obama does walk on water), but the fax is de fax.
Title: Re: Obama wants to tax 529 plans
Post by: Gin1984 on January 21, 2015, 01:56:07 PM
You bet he does!  The U.S. of A. is the most unfair place in the world.  Need to equalize.

Slippery slope when you start taxing tax-shielded plans.  If he or his ilk were in office long enough, you could expect a call to tax ROTH plans.

From article:

But administration officials claim they are going after the 529 accounts because they unfairly benefit high-income people.

Not from Fox News:

http://www.whitehouse.gov/the-press-office/2015/01/17/fact-sheet-simpler-fairer-tax-code-responsibly-invests-middle-class-fami

Limit upside-down education savings incentives and consolidate them into a single benefit. The President’s plan would consolidate education savings incentives into one vehicle and redirect the savings into the better targeted AOTC. Specifically, the President’s plan will roll back expanded tax cuts for 529 education savings plans that were enacted in 2001 for new contributions, and – like Chairman Camp’s tax reform plan – repeal tax incentives going forward for the much smaller Coverdell education savings program.

----------------------Fox News is no more biased than the mainstream media (both are fairly biased.....Obama does walk on water), but the fax is de fax.
You are funny and incorrect. 
Title: Re: Obama wants to tax 529 plans
Post by: Eric on January 21, 2015, 02:09:42 PM
Relevant making fun of Fox News link:  http://imgur.com/XKyxvZN
Title: Re: Obama wants to tax 529 plans
Post by: lizzie on January 21, 2015, 02:11:08 PM
I saw this topic and had a little freakout, since saving for college is on my mind a lot these days, and we have 529 accounts for our two teenagers, of which we will need every possible penny and more.

After googling around some, though, I’m feeling more relaxed. It sounds like the proposal would apply to new contributions only. So, at least, people who have already invested in 529s and counted on the tax savings won't get the rug pulled out from under them.

That said, I don’t have much of an opinion on whether this is a good idea for future contributions. If it’s true that the tax benefits of 529s overwhelmingly go to very wealthy people, then it may well make sense to get rid of them (they’ve only been around since 2001 anyway, or so I read). But, without the tax breaks, I’m not sure why anyone would ever invest in a 529. The proposal is to tax the gains as ordinary income, which makes them a bad deal in comparison to a regular post-tax investment account, especially given the restrictions on their use. I saw a comment on a news article claiming that all this proposal will do is turn these into estate-tax-avoidance vehicles for the very wealthy.
Title: Re: Obama wants to tax 529 plans
Post by: trailrated on January 21, 2015, 02:12:45 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
Title: Re: Obama wants to tax 529 plans
Post by: trailrated on January 21, 2015, 02:14:26 PM
Relevant making fun of Fox News link:  http://imgur.com/XKyxvZN

This was pretty damn funny
Title: Re: Obama wants to tax 529 plans
Post by: retired? on January 21, 2015, 02:18:23 PM

You are funny and incorrect.

Well, thank you, but do you disagree with the stuff other than Fox News?  The US is incredibly fair.  Obama wants to impose his own version of fairness.  All politicians need a basic econ course.  But, is it a surprise that it is upper income people who benefit most?  They are the ones who pay attn to tax incentives and the ones who have enough $$ to save beyond retirement.  If the benefit goes away, I will stop contributing. 

Not sure now they would implement this.  Would it be based on income level when contributions are made or when the funds are used?  People could put the accounts in grandparents names or the student's name (of course that counts against student assets when calculating financial aid).  Another reason to RE.  But, aside from the freedom of RE, should the tax code encourage earning less?

Fox News is fairly biased and goes overboard often.  But, I generally agree with the politics and like to see  one outlet that calls bs on much of what Obama et al do.
Title: Re: Obama wants to tax 529 plans
Post by: ash7962 on January 21, 2015, 02:24:48 PM
It doesn't seem so bad actually.  It does look like Obama is suggesting that the 529 accounts will still grow without taxes, then be taxed like income when the money is withdrawn.  I also see that he is trying to increase the AOTC (American Opportunity Tax Credit) refundable portion to 1500$ which means that families with kids in college could be receiving up to 1500$ in a tax refund.  My understanding of the tax credit is that you get a credit 2500$ and if that reduces your taxes past 0 then you get the amount that's past 0 refunded (up to 1500$).  This tax credit only applies to single people with a MAGI of 80,000$ or a married, filing jointly couple with 160,000$ MAGI.  So, I could see a middle class family still coming out ahead especially if they send their kids to an in state school or community college (where tuition is lower, therefore the taxable money you are withdrawing is lower).  This will hurt the families sending their kids to the super expensive schools because the tax credit won't cover all the taxes on the withdrawn 529 account funds.

Articles I was reading:
http://www.whitehouse.gov/the-press-office/2015/01/17/fact-sheet-simpler-fairer-tax-code-responsibly-invests-middle-class-fami
http://www.irs.gov/Individuals/AOTC
http://www.slate.com/blogs/moneybox/2015/01/20/obama_wants_to_tax_529_savings_it_s_a_great_idea.html
Title: Re: Obama wants to tax 529 plans
Post by: ash7962 on January 21, 2015, 02:26:46 PM

You are funny and incorrect.

Well, thank you, but do you disagree with the stuff other than Fox News?  The US is incredibly fair.  Obama wants to impose his own version of fairness.  All politicians need a basic econ course.  But, is it a surprise that it is upper income people who benefit most?  They are the ones who pay attn to tax incentives and the ones who have enough $$ to save beyond retirement.  If the benefit goes away, I will stop contributing. 

Not sure now they would implement this.  Would it be based on income level when contributions are made or when the funds are used?  People could put the accounts in grandparents names or the student's name (of course that counts against student assets when calculating financial aid).  Another reason to RE.  But, aside from the freedom of RE, should the tax code encourage earning less?

Fox News is fairly biased and goes overboard often.  But, I generally agree with the politics and like to see  one outlet that calls bs on much of what Obama et al do.

I'm not sure I understand why upper income people are benefiting from this the most?  Can you explain that?
Title: Re: Obama wants to tax 529 plans
Post by: Gin1984 on January 21, 2015, 02:29:58 PM

You are funny and incorrect.

Well, thank you, but do you disagree with the stuff other than Fox News?  The US is incredibly fair.  Obama wants to impose his own version of fairness.  All politicians need a basic econ course.  But, is it a surprise that it is upper income people who benefit most?  They are the ones who pay attn to tax incentives and the ones who have enough $$ to save beyond retirement.  If the benefit goes away, I will stop contributing. 

Not sure now they would implement this.  Would it be based on income level when contributions are made or when the funds are used?  People could put the accounts in grandparents names or the student's name (of course that counts against student assets when calculating financial aid).  Another reason to RE.  But, aside from the freedom of RE, should the tax code encourage earning less?

Fox News is fairly biased and goes overboard often.  But, I generally agree with the politics and like to see  one outlet that calls bs on much of what Obama et al do.
You make sense, until I get to your last paragraph and then I just end up laughing.  I can't figure out if you are serious or just trolling us.  Because I can't get how an intelligent person, which you do seem to be, could actually believe that when Fox has been proven to stated false statement AND it has been compared to other news organizations and shown to be so much worse.  Which is why they is have the nickname of Faux News.  If you want someone who is critical go with Forbes or BBC or numerous others that I can't remember off the top of my head that are not "lying liars that lie". 
But to address the issue, why do people care what he wants done, nothing will happen with GOP in charge of congress, come on now.  People are just wasting their energy.  And if you wanted to freak out over his proposals, there are may more proposed that will increases taxes on people like that the 529, which is a pretty useless thing anyway unless your state made it better.
Title: Re: Obama wants to tax 529 plans
Post by: ADK_Junkie on January 21, 2015, 02:31:08 PM
So, I have two very young kids (both 4 and under) and I work in finance.  So, I'm generally blessed with knowledge about taking advantage of tax breaks and such.  My household does well, especially for where we live, but with a take home in the mid $60s or more (obviously after maxing out various tax shelters like an HSA and 401ks).

For a long time, I've been itching to get some money into a 529 plan (stressing since every year I am losing the advantage of compounding interest), but just can't get enough together after trying to maximize lots of other benefits... like IRAs, 401ks, and such.  Really, I need substantially "more" income before we can set up and contribute to the 529s. 

While this is purely anecdotal evidence, we who are strongly middle class (maybe even considered upper middle class when considering gross incomes), cannot gather enough together to contribute to a 529.  So, when it's advertised that the 529s only really benefit those with upper incomes, I truly believe it.... I'm sure my doctor friends clearing $500K have maxed out their 529s. 

Plus the offsetting education credit actually seems more useful to me than the pie in the sky idea of squirreling away money to the 529s.
Title: Re: Obama wants to tax 529 plans
Post by: Gin1984 on January 21, 2015, 02:31:59 PM

You are funny and incorrect.

Well, thank you, but do you disagree with the stuff other than Fox News?  The US is incredibly fair.  Obama wants to impose his own version of fairness.  All politicians need a basic econ course.  But, is it a surprise that it is upper income people who benefit most?  They are the ones who pay attn to tax incentives and the ones who have enough $$ to save beyond retirement.  If the benefit goes away, I will stop contributing. 

Not sure now they would implement this.  Would it be based on income level when contributions are made or when the funds are used?  People could put the accounts in grandparents names or the student's name (of course that counts against student assets when calculating financial aid).  Another reason to RE.  But, aside from the freedom of RE, should the tax code encourage earning less?

Fox News is fairly biased and goes overboard often.  But, I generally agree with the politics and like to see  one outlet that calls bs on much of what Obama et al do.

I'm not sure I understand why upper income people are benefiting from this the most?  Can you explain that?
Because the 529 is such a crappy thing, unless your state made it better, that people in lower brackets would first fill up with an HSA, 401k, IRA and if you can do all of those and still hit the 529, you are probably pretty decent off.
Title: Re: Obama wants to tax 529 plans
Post by: seattlecyclone on January 21, 2015, 02:35:07 PM
I'm not sure I understand why upper income people are benefiting from this the most?  Can you explain that?

High-income people tend to have more money to save, and each dollar they put in a 529 plan will create more tax savings for them than someone in a lower tax bracket.

Still, the way income tax is distributed amongst different income groups, an 80/20 split actually sounds like middle-class people are taking advantage of these plans in pretty large numbers.
Title: Re: Obama wants to tax 529 plans
Post by: 2lazy2retire on January 21, 2015, 02:36:15 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.
Title: Re: Obama wants to tax 529 plans
Post by: trailrated on January 21, 2015, 02:39:32 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.

And that perfectly answered my question, "can you have a constructive argument on the proposal?"
Title: Re: Obama wants to tax 529 plans
Post by: retired? on January 21, 2015, 02:42:33 PM

You are funny and incorrect.

Well, thank you, but do you disagree with the stuff other than Fox News?  The US is incredibly fair.  Obama wants to impose his own version of fairness.  All politicians need a basic econ course.  But, is it a surprise that it is upper income people who benefit most?  They are the ones who pay attn to tax incentives and the ones who have enough $$ to save beyond retirement.  If the benefit goes away, I will stop contributing. 

Not sure now they would implement this.  Would it be based on income level when contributions are made or when the funds are used?  People could put the accounts in grandparents names or the student's name (of course that counts against student assets when calculating financial aid).  Another reason to RE.  But, aside from the freedom of RE, should the tax code encourage earning less?

Fox News is fairly biased and goes overboard often.  But, I generally agree with the politics and like to see  one outlet that calls bs on much of what Obama et al do.
You make sense, until I get to your last paragraph and then I just end up laughing.  I can't figure out if you are serious or just trolling us.  Because I can't get how an intelligent person, which you do seem to be, could actually believe that when Fox has been proven to stated false statement AND it has been compared to other news organizations and shown to be so much worse.  Which is why they is have the nickname of Faux News.  If you want someone who is critical go with Forbes or BBC or numerous others that I can't remember off the top of my head that are not "lying liars that lie". 
But to address the issue, why do people care what he wants done, nothing will happen with GOP in charge of congress, come on now.  People are just wasting their energy.  And if you wanted to freak out over his proposals, there are may more proposed that will increases taxes on people like that the 529, which is a pretty useless thing anyway unless your state made it better.

Well, I am glad to see I have made your afternoon and given you a few chuckles.  No trolling.  Actually, this site is where I first heard that term......only site I've found that appears worth providing comments.  Don't spend much time on other forums.

Just making mock surprise that Obama wants to tax the 'rich' more or reduce tax incentives more.  Lots of promises with other people's money, this guy.  Start using efficiently what you already have and show a real need for more and I'll be on board.  Vote-buying (free community college) when, as he noted, he has no more campaigns to run.
Title: Re: Obama wants to tax 529 plans
Post by: ADK_Junkie on January 21, 2015, 02:42:43 PM
Still, the way income tax is distributed amongst different income groups, an 80/20 split actually sounds like middle-class people are taking advantage of these plans in pretty large numbers.
[/quote]


It seems about 75% of the 529s out there are owned by families making more than $100K... and approx 50% of the 529 tax shelters are owned by families making more than $150K.

http://www.slate.com/blogs/moneybox/2015/01/20/obama_wants_to_tax_529_savings_it_s_a_great_idea.html (http://www.slate.com/blogs/moneybox/2015/01/20/obama_wants_to_tax_529_savings_it_s_a_great_idea.html)
Title: Re: Obama wants to tax 529 plans
Post by: CanuckExpat on January 21, 2015, 02:45:51 PM
I'm sure the bickering in this thread will continue regardless, but this post reminds me why I quite like the rules (https://www.bogleheads.org/forum/viewtopic.php?t=405) in the Bogleheads forum:
Quote
UNACCEPTABLE TOPICS
Politics and Religion
In order to avoid the inevitable frictions that arise from these topics, political or religious posts and comments are prohibited. The only exceptions to this rule are:
...
...
Discussions about enacted laws or regulations that affect the individual investor. Note that discussions of proposed laws or regulations are prohibited.


Non-actionable (Trolling) Topics
If readers can't do anything with the content of a topic other than argue about it, it does not belong here. Examples include:
US or world economic, political, tax, health care and climate policies

This topic/proposal is not at all actionable to anyone yet. It is at best a press release, not even the contents of a speech.
A president cannot make laws (http://www.trumanlibrary.org/whistlestop/teacher_lessons/3branches/17.htm).
If this ever sees the light of day, who knows what it will look like once it get's through the sausage (http://www.brainyquote.com/quotes/quotes/o/ottovonbis161318.html) making (https://www.youtube.com/watch?v=tyeJ55o3El0) process (https://www.youtube.com/watch?v=Pl3sgKj6oTQ).

Right now there is nothing we can do except argue about it.
Title: Re: Obama wants to tax 529 plans
Post by: 2lazy2retire on January 21, 2015, 02:53:00 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.

And that perfectly answered my question, "can you have a constructive argument on the proposal?"

I would fully support a law that would fine news outlets for broadcasting false information. The fact that they get away with these things on a daily basis is the reason for the great divide of what would be rational thinking people.
Title: Re: Obama wants to tax 529 plans
Post by: Schaefer Light on January 21, 2015, 02:53:47 PM
This president sure tries to make his own laws.
Title: Re: Obama wants to tax 529 plans
Post by: retired? on January 21, 2015, 03:02:53 PM
I'm sure the bickering in this thread will continue regardless, but this post reminds me why I quite like the rules (https://www.bogleheads.org/forum/viewtopic.php?t=405) in the Bogleheads forum:
Quote
UNACCEPTABLE TOPICS
Politics and Religion
In order to avoid the inevitable frictions that arise from these topics, political or religious posts and comments are prohibited. The only exceptions to this rule are:
...
...
Discussions about enacted laws or regulations that affect the individual investor. Note that discussions of proposed laws or regulations are prohibited.


Non-actionable (Trolling) Topics
If readers can't do anything with the content of a topic other than argue about it, it does not belong here. Examples include:
US or world economic, political, tax, health care and climate policies

This topic/proposal is not at all actionable to anyone yet. It is at best a press release, not even the contents of a speech.
A president cannot make laws (http://www.trumanlibrary.org/whistlestop/teacher_lessons/3branches/17.htm).
If this ever sees the light of day, who knows what it will look like once it get's through the sausage (http://www.brainyquote.com/quotes/quotes/o/ottovonbis161318.html) making (https://www.youtube.com/watch?v=tyeJ55o3El0) process (https://www.youtube.com/watch?v=Pl3sgKj6oTQ).

Right now there is nothing we can do except argue about it.

Maybe you don't want to do it, but arguing/discussing proposed laws does have a use.  It helps people form opinions and get involved in persuading their representatives if they wish to be heard.  It's not the case that once representatives are sent to D.C. they don't listen to their constituents.

Now, whether or not a topic will see the light of day can guide you regarding whether to engage.  To me, this one could "have legs".  A change to 529s is not such a wild idea.  The time to express an opinion is before a law is made.  Otherwise, you sit back and deal with the new situation.

I'd also argue that the MMM forums are broader than boglehead.
Title: Re: Obama wants to tax 529 plans
Post by: 2lazy2retire on January 21, 2015, 03:06:30 PM
I'm sure the bickering in this thread will continue regardless, but this post reminds me why I quite like the rules (https://www.bogleheads.org/forum/viewtopic.php?t=405) in the Bogleheads forum:
Quote
UNACCEPTABLE TOPICS
Politics and Religion
In order to avoid the inevitable frictions that arise from these topics, political or religious posts and comments are prohibited. The only exceptions to this rule are:
...
...
Discussions about enacted laws or regulations that affect the individual investor. Note that discussions of proposed laws or regulations are prohibited.


Non-actionable (Trolling) Topics
If readers can't do anything with the content of a topic other than argue about it, it does not belong here. Examples include:
US or world economic, political, tax, health care and climate policies

This topic/proposal is not at all actionable to anyone yet. It is at best a press release, not even the contents of a speech.
A president cannot make laws (http://www.trumanlibrary.org/whistlestop/teacher_lessons/3branches/17.htm).
If this ever sees the light of day, who knows what it will look like once it get's through the sausage (http://www.brainyquote.com/quotes/quotes/o/ottovonbis161318.html) making (https://www.youtube.com/watch?v=tyeJ55o3El0) process (https://www.youtube.com/watch?v=Pl3sgKj6oTQ).

Right now there is nothing we can do except argue about it.

Maybe you don't want to do it, but arguing/discussing proposed laws does have a use.  It helps people form opinions and get involved in persuading their representatives if they wish to be heard.  It's not the case that once representatives are sent to D.C. they don't listen to their constituents.

Now, whether or not a topic will see the light of day can guide you regarding whether to engage.  To me, this one could "have legs".  A change to 529s is not such a wild idea.  The time to express an opinion is before a law is made.  Otherwise, you sit back and deal with the new situation.

I'd also argue that the MMM forums are broader than boglehead.
"It's not the case that once representatives are sent to D.C. they don't listen to their constituents"
AAAaaaaaHHH thats nice - and we all lived happily ever after
Title: Re: Obama wants to tax 529 plans
Post by: ash7962 on January 21, 2015, 03:09:56 PM

You are funny and incorrect.

Well, thank you, but do you disagree with the stuff other than Fox News?  The US is incredibly fair.  Obama wants to impose his own version of fairness.  All politicians need a basic econ course.  But, is it a surprise that it is upper income people who benefit most?  They are the ones who pay attn to tax incentives and the ones who have enough $$ to save beyond retirement.  If the benefit goes away, I will stop contributing. 

Not sure now they would implement this.  Would it be based on income level when contributions are made or when the funds are used?  People could put the accounts in grandparents names or the student's name (of course that counts against student assets when calculating financial aid).  Another reason to RE.  But, aside from the freedom of RE, should the tax code encourage earning less?

Fox News is fairly biased and goes overboard often.  But, I generally agree with the politics and like to see  one outlet that calls bs on much of what Obama et al do.

I'm not sure I understand why upper income people are benefiting from this the most?  Can you explain that?
Because the 529 is such a crappy thing, unless your state made it better, that people in lower brackets would first fill up with an HSA, 401k, IRA and if you can do all of those and still hit the 529, you are probably pretty decent off.

Ok what you said makes sense, but then wouldn't that mean taxing the withdrawal from the 529 would be primarily affecting the rich?  I should have been more specific in the question, I meant why would removing the tax cuts on the 529 benefit the rich?  I thought that's what the person I quoted was implying, and that's what I'm not understanding.  Also I don't buy that a middle class person can't contribute to a 529.  What about the kid's birthday/graduation/Christmas money?  Some portion of money gifts from family members could be stashed away into the 529 regardless of a parent's income.
Title: Re: Obama wants to tax 529 plans
Post by: viper155 on January 21, 2015, 03:34:32 PM
You had me till I seen FOX "NEWS"

What does FOX news have to do with it? It's Obama shitty idea, not theirs. This is more of his cradle to grave BS.
Title: Re: Obama wants to tax 529 plans
Post by: viper155 on January 21, 2015, 03:36:11 PM
I saw this topic and had a little freakout, since saving for college is on my mind a lot these days, and we have 529 accounts for our two teenagers, of which we will need every possible penny and more.

After googling around some, though, I’m feeling more relaxed. It sounds like the proposal would apply to new contributions only. So, at least, people who have already invested in 529s and counted on the tax savings won't get the rug pulled out from under them.

That said, I don’t have much of an opinion on whether this is a good idea for future contributions. If it’s true that the tax benefits of 529s overwhelmingly go to very wealthy people, then it may well make sense to get rid of them (they’ve only been around since 2001 anyway, or so I read). But, without the tax breaks, I’m not sure why anyone would ever invest in a 529. The proposal is to tax the gains as ordinary income, which makes them a bad deal in comparison to a regular post-tax investment account, especially given the restrictions on their use. I saw a comment on a news article claiming that all this proposal will do is turn these into estate-tax-avoidance vehicles for the very wealthy.

So...You're okay but F everyone else?

MOD EDIT: Your posts are coming very close to being rude trolling.  Please read the site rules and consider how you interact with other forum members.
Title: Re: Obama wants to tax 529 plans
Post by: viper155 on January 21, 2015, 03:38:10 PM

You are funny and incorrect.

Well, thank you, but do you disagree with the stuff other than Fox News?  The US is incredibly fair.  Obama wants to impose his own version of fairness.  All politicians need a basic econ course.  But, is it a surprise that it is upper income people who benefit most?  They are the ones who pay attn to tax incentives and the ones who have enough $$ to save beyond retirement.  If the benefit goes away, I will stop contributing. 

Not sure now they would implement this.  Would it be based on income level when contributions are made or when the funds are used?  People could put the accounts in grandparents names or the student's name (of course that counts against student assets when calculating financial aid).  Another reason to RE.  But, aside from the freedom of RE, should the tax code encourage earning less?

Fox News is fairly biased and goes overboard often.  But, I generally agree with the politics and like to see  one outlet that calls bs on much of what Obama et al do.

I'm not sure I understand why upper income people are benefiting from this the most?  Can you explain that?

It cant be explained////upperincome people dont use or need 529's. The overwhelming majority of users are solidly middle class. The next 2 years cant go fast enough......
Title: Re: Obama wants to tax 529 plans
Post by: College Stash on January 21, 2015, 03:54:52 PM
Another anecdote for what a tragically terrible president Obama is. I come from a very middle class family that made about 60k a yr most of my life, yet was still able to save a large amount into a 529 for me. Yes, wealthy individuals may use 529s more, but that does not mean the middle class should lose out on this valuable benefit.
Title: Re: Obama wants to tax 529 plans
Post by: lizzie on January 21, 2015, 03:57:27 PM
I saw this topic and had a little freakout, since saving for college is on my mind a lot these days, and we have 529 accounts for our two teenagers, of which we will need every possible penny and more.

After googling around some, though, I’m feeling more relaxed. It sounds like the proposal would apply to new contributions only. So, at least, people who have already invested in 529s and counted on the tax savings won't get the rug pulled out from under them.

That said, I don’t have much of an opinion on whether this is a good idea for future contributions. If it’s true that the tax benefits of 529s overwhelmingly go to very wealthy people, then it may well make sense to get rid of them (they’ve only been around since 2001 anyway, or so I read). But, without the tax breaks, I’m not sure why anyone would ever invest in a 529. The proposal is to tax the gains as ordinary income, which makes them a bad deal in comparison to a regular post-tax investment account, especially given the restrictions on their use. I saw a comment on a news article claiming that all this proposal will do is turn these into estate-tax-avoidance vehicles for the very wealthy.

So...You're okay but F everyone else?

MOD EDIT: Your posts are coming very close to being rude trolling.  Please read the site rules and consider how you interact with other forum members.

I admit that one can certainly criticize my comment as being motivated by my own self-interest; I originally tried to draft it to acknowledge that but wound up taking it out.

Anyway, my comment stems from the fact that, if 529s never were tax advantaged, I never would have invested in them, and I wouldn't have felt F'd just because there wasn't a tax-advantaged vehicle to invest for college saving. It just struck me as particularly unfair that anyone who invested in a 529 precisely because of the tax advantages would have the rules changed mid-stream, since that's the only reason to invest in them and since the proposed changes would actually make them worse than regular post-tax investment accounts. I actually kind of regret even investing in them at all (even with the tax advantages). So, like I said, without the tax advantages I wouldn't have ever invested in them and I don't think I would have considered myself F'd.

Now, if you're saying that I'm selfish because I don't care that much whether this vehicle is available in the future: like I said, I'm kind of meh about it either way, mostly because I don't know how well they work for most people and if they're being used for the purpose for which they are intended. These are empirical questions and I'm open to being persuaded either way, depending on the answers. I don't think that makes me a selfish asshole, but YMMV.
Title: Re: Obama wants to tax 529 plans
Post by: Gin1984 on January 21, 2015, 04:05:50 PM

You are funny and incorrect.

Well, thank you, but do you disagree with the stuff other than Fox News?  The US is incredibly fair.  Obama wants to impose his own version of fairness.  All politicians need a basic econ course.  But, is it a surprise that it is upper income people who benefit most?  They are the ones who pay attn to tax incentives and the ones who have enough $$ to save beyond retirement.  If the benefit goes away, I will stop contributing. 

Not sure now they would implement this.  Would it be based on income level when contributions are made or when the funds are used?  People could put the accounts in grandparents names or the student's name (of course that counts against student assets when calculating financial aid).  Another reason to RE.  But, aside from the freedom of RE, should the tax code encourage earning less?

Fox News is fairly biased and goes overboard often.  But, I generally agree with the politics and like to see  one outlet that calls bs on much of what Obama et al do.

I'm not sure I understand why upper income people are benefiting from this the most?  Can you explain that?
Because the 529 is such a crappy thing, unless your state made it better, that people in lower brackets would first fill up with an HSA, 401k, IRA and if you can do all of those and still hit the 529, you are probably pretty decent off.

Ok what you said makes sense, but then wouldn't that mean taxing the withdrawal from the 529 would be primarily affecting the rich?  I should have been more specific in the question, I meant why would removing the tax cuts on the 529 benefit the rich?  I thought that's what the person I quoted was implying, and that's what I'm not understanding.  Also I don't buy that a middle class person can't contribute to a 529.  What about the kid's birthday/graduation/Christmas money?  Some portion of money gifts from family members could be stashed away into the 529 regardless of a parent's income.
Some middle class people probably are putting money into a 529, that does not mean it is often not the best fiscal choice, unless of course your state some benefits.  I know other grad students who now use the 529 for living expenses once I learned about it here because NY lets you deduct $5000 for singles or $10,000 for family and we can spend over $1000/month on living according to the school.  Or a relative who is putting money in the TN 529 because it has state benefits.  But, with that exception, it is probably the worse thing available but that does not mean people are not using it, lol. 
Title: Re: Obama wants to tax 529 plans
Post by: sobezen on January 21, 2015, 04:29:10 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.
Title: Re: Obama wants to tax 529 plans
Post by: RangerOne on January 21, 2015, 04:49:05 PM
If I understand this right, didn't know about 529 plans... you put post tax money into the account and it can grow tax free in the market. Then based on qualified distributions the money can be taken out tax free to pay for college expenses.

I don't see a problem with this. Anything that encourages families to save money and pay for higher education without loans is probably a positive thing.

Though it must not be widely advertised a lot because I think a lot of middle income families don't know about these. Or do and are afraid to invest...

One way you could twist it is to say it only benefits people with a lot of disposable income. But really this could benefit anyone who is good at saving money and living within their means.
Title: Re: Obama wants to tax 529 plans
Post by: Gin1984 on January 21, 2015, 04:51:41 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 used to be in Ca and even as a student myself, when I could not get the federal tax credits, I did not use it.  There are no state benefits.  However, if you max out every single tax advantage account there is plus a little in taxable and you want to put some, why not?
Title: Re: Obama wants to tax 529 plans
Post by: trailrated on January 21, 2015, 04:56:08 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.
Title: Re: Obama wants to tax 529 plans
Post by: DMoney on January 21, 2015, 05:07:00 PM
Perhaps the tax code shouldn't incentivize ANY saving.  Since that is only something "rich" people do, meaning people who have some money left at the end of the month after meeting their monthly expenses.  I mean, the people who are really struggling aren't contributing to 401Ks or Roth IRAs, so unfair.    <sarcasm>

This is lousy.  I hope it stays as a White House idea and doesn't make it through congress.
Title: Re: Obama wants to tax 529 plans
Post by: Gin1984 on January 21, 2015, 05:09:15 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.
Title: Re: Obama wants to tax 529 plans
Post by: GizmoTX on January 21, 2015, 05:46:42 PM
Never mind Fox, here's what Forbes has to say:

"People don’t care that a wealthy person might also own a 529 plan.  People care that THEY own a 529 plan, and that Obama is seeking to tax it out of practical existence.  It’s an attack on their values, an attack on their version of the American Dream, and an attack on their own personal aspirations as parents."

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

Obama's "plan" is to remove the 529 tax exempt status that Bush put into place, & it's wouldn't be means tested -- it flat would go away. Yet it's being presented as once again taxing the rich. But the "rich" aren't using 529s -- the middle class is.

While this should have no chance of being passed while the GOP is in control of Congress, Obama's proposal sets up the FUD factor (fear, uncertainy, & doubt) for 529s from this point on. Another broken promise.
Title: Re: Obama wants to tax 529 plans
Post by: Paul der Krake on January 21, 2015, 05:59:53 PM
Getting rid of the 529 is not happening in a vacuum, it's part of a package that replaces it with, or increases already existing, tax credits. Why don't we analyze and debate the whole proposal instead of just one part?
Title: Re: Obama wants to tax 529 plans
Post by: gimp on January 21, 2015, 07:02:29 PM
Did people ever discuss politics politely, or am I just hoping they did and we've gotten worse?

- Any talk of rich versus middle class is innately misleading. Most people consider themselves "middle class" when they are not. Many people who do indeed fall into the middle class (if you consider it as the middle 60% of the population) are considered rich by others. This is flamebaiting, misleading, and a fantastically shitty way to turn people against each other for cheap politics.

- The 529 plan is not going away. Certain tax-advantaged parts of it are proposed to go away, and only for new contributions.

My opinion on the subject:

The 529 plan, like many of the plans most of us here enjoy, are a gimme to people who can do without them. If they disappear, so it goes. Don't weep overmuch.

With that said, certainly I would use it if it was available to me. I am principled, but won't pass up free money even when I can do without.

If the changes do indeed pay for two more years of education for everyone capable and interested, and the math works, I think it's a fair trade. A higher educated workforce will earn more, and use their disposable income to buy products my company makes, and I get paid more to compensate for the loss of the plan. You may not.

However, you can state your reasons in support or opposition without being a dumbass, a troll, or a flamebaiter about it. Try it. It works.
Title: Re: Obama wants to tax 529 plans
Post by: bzzzt on January 21, 2015, 09:50:38 PM
- Any talk of rich versus middle class is innately misleading. Most people consider themselves "middle class" when they are not. Many people who do indeed fall into the middle class (if you consider it as the middle 60% of the population) are considered rich by others. This is flamebaiting, misleading, and a fantastically shitty way to turn people against each other for cheap politics.

Personally, some of the "redistribution of wealth" sits sideways with me. DW and I fall into the top 10% based on income. We live in a modest home (1000 sq. ft), own 11 year old vehicles, don't drive much, I fix almost anything that breaks (car/house/tech), and we don't travel as much as we like because we leave ourselves open for "mandatory" overtime. We consider ourselves middle class, or at least what middle class used to be before 30 years of trickle down economics.

Seeing someone buying $20 worth of microwave food from the gas station and driving a newer vehicle while paying with a LINK card makes me want to puke. I am still for the ACA, but I'm a little tired of hearing about how we need to help the poor. Instead of watching dumb shit on Youtube, watch videos on how to fix your car. Instead of watching Netflix, read how to fix your computer so you can send out resumes. No jobs where you live? MOVE! I traveled the country in 2010/11/12 chasing work (construction). Get out of your damn comfort zone if you want to get out of poverty.

Poor people don't need community college. Poor people need role models with work ethic who can show them how to work their butts off. Instead, they're watching butts, like the Kardashians.

Sympathy, just a word in the dictionary between Shit and Syphilis. I am a compassionate person, but it's not my fault they/their family has made bad choices. I'll bet it's nice and comfy on the couch tomorrow while I go to work outside and then work on insulating my attic after work.

I haven't contributed to a 529 yet, but I'll have to investigate it more before the end of the year.
Title: Re: Obama wants to tax 529 plans
Post by: Cwadda on January 21, 2015, 10:54:33 PM
http://www.irs.gov/uac/529-Plans:-Questions-and-Answers

Quote
Q. Can anyone set up a 529 plan?
A. Yes. You can set one up and name anyone as a beneficiary — a relative, a friend, even yourself. There are no income restrictions on on either you, as the contributor, or the beneficiary. There is also no limit to the number of plans you set up.

What if there WERE income restrictions? Similar idea to the Roth and Traditional IRA limits.
Title: Re: Obama wants to tax 529 plans
Post by: 2lazy2retire on January 22, 2015, 06:23:53 AM
- Any talk of rich versus middle class is innately misleading. Most people consider themselves "middle class" when they are not. Many people who do indeed fall into the middle class (if you consider it as the middle 60% of the population) are considered rich by others. This is flamebaiting, misleading, and a fantastically shitty way to turn people against each other for cheap politics.

Personally, some of the "redistribution of wealth" sits sideways with me. DW and I fall into the top 10% based on income. We live in a modest home (1000 sq. ft), own 11 year old vehicles, don't drive much, I fix almost anything that breaks (car/house/tech), and we don't travel as much as we like because we leave ourselves open for "mandatory" overtime. We consider ourselves middle class, or at least what middle class used to be before 30 years of trickle down economics.

Seeing someone buying $20 worth of microwave food from the gas station and driving a newer vehicle while paying with a LINK card makes me want to puke. I am still for the ACA, but I'm a little tired of hearing about how we need to help the poor. Instead of watching dumb shit on Youtube, watch videos on how to fix your car. Instead of watching Netflix, read how to fix your computer so you can send out resumes. No jobs where you live? MOVE! I traveled the country in 2010/11/12 chasing work (construction). Get out of your damn comfort zone if you want to get out of poverty.

Poor people don't need community college. Poor people need role models with work ethic who can show them how to work their butts off. Instead, they're watching butts, like the Kardashians.

Sympathy, just a word in the dictionary between Shit and Syphilis. I am a compassionate person, but it's not my fault they/their family has made bad choices. I'll bet it's nice and comfy on the couch tomorrow while I go to work outside and then work on insulating my attic after work.

I haven't contributed to a 529 yet, but I'll have to investigate it more before the end of the year.

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.
Title: Re: Obama wants to tax 529 plans
Post by: StashDaddy on January 22, 2015, 06:34:29 AM
Epic post, bzzzt =)  Oh, but a certain segment of people on this forum will shout at you that those poor people are "victims" for choosing to watch 7 hours of Kardashian TV per day, and then going out and buying $20 on junk food, rather than instead getting off their asses and taking the time to cook a healthy meal.  "Victims", don't ya know!?

As for the mortgage deduction, I agree with you on that one 2lazy2retire--lets cut that, too! 

Quote
Many economists would argue that when you create a tax incentive, the real effect is to raise prices. When home interest is deductible, the amount that a homeowner can pay per month goes up - and thus prices rise in a competitive market.

http://livingstingy.blogspot.com/2010/06/flat-tax.html
Title: Re: Obama wants to tax 529 plans
Post by: chemgeek on January 22, 2015, 10:37:02 AM
So, I have two very young kids (both 4 and under) and I work in finance.  So, I'm generally blessed with knowledge about taking advantage of tax breaks and such.  My household does well, especially for where we live, but with a take home in the mid $60s or more (obviously after maxing out various tax shelters like an HSA and 401ks).

For a long time, I've been itching to get some money into a 529 plan (stressing since every year I am losing the advantage of compounding interest), but just can't get enough together after trying to maximize lots of other benefits... like IRAs, 401ks, and such.  Really, I need substantially "more" income before we can set up and contribute to the 529s. 

While this is purely anecdotal evidence, we who are strongly middle class (maybe even considered upper middle class when considering gross incomes), cannot gather enough together to contribute to a 529.  So, when it's advertised that the 529s only really benefit those with upper incomes, I truly believe it.... I'm sure my doctor friends clearing $500K have maxed out their 529s. 

Plus the offsetting education credit actually seems more useful to me than the pie in the sky idea of squirreling away money to the 529s.

I think what you're assuming is that other people in your income bracket are also maxing out their retirement or HSA accounts, which, based on recent polling, is really not the case. I'm sure there are families that prioritize ( right or wrong) having college savings for their kids over maxing out a 401k at work and contribute to a 529 in lieu of retirement. I think this is where some people's outrage is coming from. If you're choosing to put money towards your child's future instead of yours and then the rules change, you feel like you got screwed.  I think there's also probably a complex list of reasons as to why less people use these accounts in lower/middle income levels than currently do. Not having money left over is a big part of it, but aversion to investing/no knowledge or understanding of these types of savings vehicles/wildly different state by state regulations are probably contributing factors. 
Title: Re: Obama wants to tax 529 plans
Post by: bacchi on January 22, 2015, 11:07:03 AM
529 plans, as they're currently implemented, can act much like a super-Roth plan for the wealthy.

1) The contribution limit is set by the state (to the tune of $100-300,000).
2) You can have multiple plans because, ya know, medical school.
3) If you withdraw money for a non qualified use, income tax on the earnings and a 10% penalty are due. Even with the penalty, the tax-deferred incubation time (~17 years) makes it well worth it.

There's no question that the 529 needs some fine-tuning.

Edit: The money left in a 529 can also be kept there and passed on to a grandchild. In other words, the 529 can become an educational trust for any heirs.
Title: Re: Obama wants to tax 529 plans
Post by: Homey The Clown on January 22, 2015, 12:03:58 PM
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 do have one question. If this were a regular investment account, gains would be taxed as capital gains. The proposal would tax it as income. Doesn't that make the proposal worse than just using a regular investment account to save?
Title: Re: Obama wants to tax 529 plans
Post by: johnny847 on January 22, 2015, 12:14:41 PM
I do have one question. If this were a regular investment account, gains would be taxed as capital gains. The proposal would tax it as income. Doesn't that make the proposal worse than just using a regular investment account to save?
That's one thing that I thought was odd about the way that the proposal was phrased.

I assume that if they want to tax it like income, it would have to be taxed just like withdrawals from a traditional IRA with a basis would be taxed (because otherwise, like you said, it would be worse than a regular investment account). At that point, the only difference between a traditional IRA with a basis and a 529 would be the 529 may be eligible for a state tax deduction.

If this moves forward, I'd imagine 529s would only be used up to the tax deduction limits (if at all), and then parents would invest the rest of the money in a taxable account, since the expense ratios are lower there and they can get long capital gains treatment. Oh and of course, the flexibility to use the funds for whatever they want in case they don't end up using it for educational purposes.
Title: Re: Obama wants to tax 529 plans
Post by: retired? 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.
Title: Re: Obama wants to tax 529 plans
Post by: bzzzt 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!
Title: Re: Obama wants to tax 529 plans
Post by: Eric 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
Title: Re: Obama wants to tax 529 plans
Post by: bzzzt 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.
Title: Re: Obama wants to tax 529 plans
Post by: rosaz 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).
Title: Re: Obama wants to tax 529 plans
Post by: Gin1984 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.
Title: Re: Obama wants to tax 529 plans
Post by: 2lazy2retire 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?
Title: Re: Obama wants to tax 529 plans
Post by: bzzzt 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.
Title: Re: Obama wants to tax 529 plans
Post by: KBecks2 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?
Title: Re: Obama wants to tax 529 plans
Post by: johnny847 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
Title: Re: Obama wants to tax 529 plans
Post by: bacchi 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! :'(
Title: Re: Obama wants to tax 529 plans
Post by: gimp 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.
Title: Re: Obama wants to tax 529 plans
Post by: TreeTired 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.
Title: Re: Obama wants to tax 529 plans
Post by: johnny847 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.
Title: Re: Obama wants to tax 529 plans
Post by: StashDaddy 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. 
Title: Re: Obama wants to tax 529 plans
Post by: johnny847 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.
Title: Re: Obama wants to tax 529 plans
Post by: StashDaddy 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. 
Title: Re: Obama wants to tax 529 plans
Post by: StashDaddy 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....  =)
Title: Re: Obama wants to tax 529 plans
Post by: johnny847 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.
Title: Re: Obama wants to tax 529 plans
Post by: StashDaddy 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.... 
Title: Re: Obama wants to tax 529 plans
Post by: seattlecyclone 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 (http://www.nytimes.com/2015/01/28/us/politics/obama-will-drop-proposal-to-end-529-college-savings-plans.html).
Title: Re: Obama wants to tax 529 plans
Post by: StashDaddy on January 27, 2015, 05:51:07 PM
Interesting, thanks for the link.  Well, i guess that about wraps up this thread. 
Title: Re: Obama wants to tax 529 plans
Post by: CanuckExpat 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 (http://www.theonion.com/articles/well-heres-what-wont-pass-obama-says-before-listin,37811/)
Title: Re: Obama wants to tax 529 plans
Post by: trailrated on January 28, 2015, 10:04:34 AM
http://finance.yahoo.com/news/obama-drops-plan-to-raise-taxes-on--529--college-savings-accounts-232937566.html (http://finance.yahoo.com/news/obama-drops-plan-to-raise-taxes-on--529--college-savings-accounts-232937566.html)


annnnnnnd 529's are still safe
Title: Re: Obama wants to tax 529 plans
Post by: StashDaddy on January 28, 2015, 01:01:39 PM
Pretty funny article from The Onion there =)
Title: Re: Obama wants to tax 529 plans
Post by: 2lazy2retire 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
Title: Re: Obama wants to tax 529 plans
Post by: 2lazy2retire 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
Title: Re: Obama wants to tax 529 plans
Post by: Dollarbill49 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?
Title: Re: Obama wants to tax 529 plans
Post by: 2lazy2retire 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.
Title: Re: Obama wants to tax 529 plans
Post by: joer1212 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.
Title: Re: Obama wants to tax 529 plans
Post by: joer1212 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.
Title: Re: Obama wants to tax 529 plans
Post by: joer1212 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.
Title: Re: Obama wants to tax 529 plans
Post by: johnny847 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.
Title: Re: Obama wants to tax 529 plans
Post by: MrMonkeyMustache 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.
Title: Re: Obama wants to tax 529 plans
Post by: johnny847 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
Title: Re: Obama wants to tax 529 plans
Post by: Gin1984 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.