President Obama wants everyone to have two “free” years of junior college. In his recent “State of the Nation,” address he laid out new tax packages that includes a $320 billion hike to help pay for this plan.
But here’s what he didn’t say…
Under current law, 529-Plans work like Roth IRAs — you put money in, and the money grows tax-free for college. Distributions are tax-free provided they are to pay for college.
If Obama has his way, 529-Plans will no longer be tax-free, instead those earnings will be taxed upon withdrawal, even if it is used to pay for college. In addition to taxing college savings plans, Obama is calling for a hike in capital gains taxes, an increase in the death tax, a bank tax and an increase in retirement plan taxes.
It’s nothing more than a redistribution system as those who are saving and planning ahead for college will have to foot the bill for those who didn’t.