President Obama wants everyone to have two “free” years of junior college. In his recent “State of the Union,” address he laid out new tax packages that includes a $320 billion hike to help pay for this plan.
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.
But here’s what Obama didn’t say in plain, understandable language…
Under the Obama plan, earnings from a 529-Plan will no longer be tax-free. Instead, earnings would be taxed upon withdrawal, even if the withdrawal is 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. Each of his proposals will affect the middle class either directly or somewhere down the road.
This is nothing more than a ‘redistribution of wealth’ plan as those who’ve been saving and planning ahead for college will foot the bill for those who didn’t.