Quote of the Day:
Well, that must have polled badly.
—Wall Street Journal on White House’s dropping its plans to tax 529, middle-class college savings funds
The White House’s announcement yesterday that it will abandon its plan to tax 529 savings plans that families use to send children to college is welcome news indeed. Still, the Wall Street Journal wishes that the plan—which wasn’t going to pass anyway in a Republican-controlled Congress—had “rotted in the sun” for a few more months because it was instructive for middle class taxpayers who might at this late date believe that the president is in their corner.
The editorial explains:
Mr. Obama wanted to tax 529 plans to finance a more targeted college subsidy program that politicians could better control. The 529 plans put the power in the hands of parents. The political problem is that 529s have become popular with, well, the middle class; there were some 11.8 million accounts and the average balance was $20,671 as of last June.
Kudos to Speaker of the House John Boehner for asking President Obama to ditch the plan and the Ways and Means Committee, which was preparing legislation on the proposal so that Democrats would have to vote on the tax grab. The Journal thinks it is too bad that the Democrats didn’t get to vote because that, too, would have been instructive:
It’s a shame there won’t be a vote, because the 529 tax increase is a rare example of the President’s policy sincerity. Liberals sooner or later must raise taxes on the middle class because taxing the rich alone can’t possibly finance all of the Democratic Party’s entitlement schemes. The middle class is where the real money is. So while taxing 529s may die for now, it’s only a matter of time before liberals are back with a carbon tax or value-added tax or something. That’s the real meaning of “middle-class economics.”
I also urge you to read Commentary blogger Jonathan Tobin’s take on the withdrawal of the 529 plan by the White House (you get eight free blogs a month at Commentary, and this one is worthy of making it one of them):
As Seth Mandel noted last week, the elimination of the 529 accounts had little to do with helping middle-class taxpayers or promoting education. The point of the plan was to expand the power of government and its loan racket that exploits the students it purports to help. …
This [withdrawal of the 529 proposal] was more than what even the Times termed a “flubbed launch.” It was a crucial moment that exposed the presidential Merry Men as mere thieves preying on the middle class, not its saviors. Conservatives who have been back on their heels this month should take heart.
The Washington Post has a good analysis of how the proposal fell apart. Even Rep. Nancy Pelosi, possibly scenting peril to Democrats of a vote on the matter, bent the president's ear on the need to withdraw the unpopular plan. Interesting tidbit: the Obamas have themselves made significant use of 529 savings plans.