Media coverage of the tax bills–which are now in conference and could be brought to a final vote this year—has focused on how it will impact corporations, workers, families with children, and higher income residence of states with high state income tax rates.
This makes sense: When this legislation becomes law, it's most sweeping effects will be in reducing burdens on businesses large and small, which will benefit workers and those looking for jobs, as well as shareholders. Regular taxpayers will also be among the biggest winners, with rate cuts that will mean people will keep more of their earnings and a rationalization of deductions, which could encourage reform at the state level.
Families with children are also among the biggest winners. Not only will the child tax credit expand from $1,000 per child to at least $1,600, but an under-reported change that was in both the House and Senate bills is also good news for parents. The legislation would liberalize how people can use money that is saved in 529 accounts, which have traditionally been savings vehicles for college, so that families can draw on those resources for educational expenses during elementary and high school as well.
There are currently about 10.9 million 529 accounts, with assets totally in excess of $224 billion. After this change, families will be able to consider using a portion of these resources for elementary and high school expenses, including for homeschooling. This change would allow people to make investments in education services today, and to consider saving more since they know that they can use these resources not just for college but for more immediate needs.
Importantly, this change also sends a critical message both to families and to the education sector. For too long, college has been positioned as the ultimate goal of the education process. Families have been encouraged to see getting their children degrees at four-year higher education establishments as the definition of success and they have been encouraged to sacrifice spending earlier—on education or on other family needs—to prepare to make a massive investment in the education that occurs between the ages of 18 and 22, at a college or university.
Many have come to question the logic of this approach. Colleges have been able to rapidly increase tuition costs since people have been force-fed the idea that their service is a must for a successful life. As a result, the average student at a four-year public college is now expected to invest about $100,000 in higher education for a bachelor's degree. During the recent economic downturn, unemployment and underemployment increased among recent graduates, which meant that millions of young people were trying to service nearly six-figure debts, while working jobs that barely paid the bills.
No wonder that a growing share of the population no longer thinks that college is a good investment. In fact, a poll taken this summer found that just 49 percent of Americans think a four-year degree will “lead to a good job and higher lifetime earnings.” Nearly as many (47%) disagreed. Three in ten college graduates thought that college wasn't worth the cost.