Posted on 12/14/2017 10:54:26 AM PST by 11th_VA
Last week, the Senate passed its version of the Tax Cuts and Jobs Act, paving the way for a conference with the House. Congress is now preparing to iron out the details between the two bodies. That includes the late inclusion of an amendment by Sen. Ted Cruz (R-Texas) that would expand 529 savings accounts to incorporate K-12 expenses.
Should this provision make it out of the conference report and to the president’s desk, its impact would be both far-reaching and immensely consequential.
Under current law, 529 savings accounts are tax-advantaged investments in the Internal Revenue Code used for college and higher-education expenses. These accounts use after-tax contributions wherein the benefits and accumulated growth are not taxed. The contributions can either prepay for future courses or tuition, or can be saved and invested in a portfolio to increase the growth potential of these accounts before a student is enrolled in college. Millions of American families make use of 529s to plan ahead for their children’s higher education — often beginning when a child is at a young age.
These accounts should be expanded beyond their current scope to provide maximum flexibility and empower parents. The Cruz amendment would allow 529s to be used for tuition at private or religious schools, homeschooling materials, expenses related to curricula, online education courses, and non-tuition based expenses for things like educational therapy and training for students with disabilities.
This means that everyone would stand to benefit — including households who send their children to public schools — as these expanded 529s would incorporate non-tuition based expenditures. Under this proposal, tax free contributions to these expanded 529s would be capped at $10,000 per year.
This is the kind of innovation desperately needed to break beyond the government’s outdated model and an important step in unleashing education freedom in the 21st century. Indeed, not only is this approach a fundamental reordering of the tax code to the advantage of families, but it’s also a drastic and much-needed shift of power away from education bureaucrats in the direction of students.
And importantly, this measure would help unleash education freedom while maintaining federalism safeguards. This approach resists the temptation that many lawmakers encounter to federalize school choice through a new federal tax credit — a measure that, while well-intentioned, would only grow Washington’s power and ensconce the influence of unions, high-powered lobbyists, and technocrats.
Expanding 529s to include K-12 expenses would be one of the most consequential policy improvements for middle and lower-income households in a generation. While the overall tax bill would provide some degree of tax relief for Americans, the expansion of 529s is truly a game changer.
Single moms working two jobs to send their child to a good private school would have an added boost for tuition payments. A family with a special-needs child enrolled in public school would have the ability to pay for a skilled tutor. A guardian could find the money to pay for a child’s online courses. Homeschoolers would have new resources to purchase books and materials for their classes. And new parents can start saving immediately for their baby’s college education. Expanded 529s put individuals in control of their family’s future.
Such an idea has been a long time in the making and a cornerstone of the conservative education policy vision.
Congress should ensure this provision stays in the final version of the tax bill so we can finally break the educational logjam, diminish the power of bureaucrats, and improve the lives of parents, families, and students. Drew White is senior federal policy analyst at the Texas Public Policy Foundation, a nonprofit aimed at reducing the size of government.
I simply want all tax monies a child would otherwise receive to be given to the parents to educate their child as they see fit.
Otherwise, this, coupled with some level of reduction to the public school’s funding should occur. Maybe allow only half of each removed student’s taxes to be taken from local taxpayers. I’d love to slowly starve public schools in favor of solid alternatives that don’t indoctrinate liberalism.
This will just make education more expensive. The colleges will see those big piles of money sitting out there and raise tuition commensurately, just like when they saw those big piles of potential college loan dollars sitting out there.
If I withdraw from a 529 to pay for education, is that taxable income to the student?
“game changer” seems to be the new default cliche poor economic and political writers are using now.
“I simply want all tax monies a child would otherwise receive to be given to the parents to educate their child as they see fit.”
I simply want a new truck every year!
What are our chances?
The DESPICABLE Rubio says he will vote against it unless it gets a child credit that HE LIKES. Time for him to GO!
I’ve been trying to get a ruling on if I can use a 529 to finance my own Doctorate or Juris... no one knows...
no.
you pay taxes on the money when you earn it. It grows tax free.
So if you put in 1,000 (after paying taxes on it) and it grows over the years to 100,000. you got 99,000 tax free to pay for your kids tuition costs.
No. But contributions are not tax deductible. So I fail to see where this is of benefit to the single mom in the example, working two jobs to send her kids to private school. The tuition isn't deductible now or after the tax plan passes.
Any other new entitlement you want?
Your financial consultant is better than my financial consultant.
Can we just stop fueling education spending? Lower taxes for all and let the parents decide.
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