YOUNGSTOWN, Ohio (WYTV) – One of the tax changes President Obama proposed in his State of the Union Address is getting some backlash from families saving for college.
Obama announced that he wants to tax the 529 college savings plan. That idea doesn’t sit well with Ingrid McConnell and her husband. They chose the 529 plan to save for their children’s education because it allows the money to grow, tax free. If the funds are used for college, it is not taxed then either.
“We were putting in money as soon as they were born. We looked at it like you pay your mortgage; you pay your insurance; your taxes and you save for college through this 529 vehicle,” McConnell said.
Financial advisor Doug Vaclav says it will make college more expensive for families trying to save. In the McConnell’s case, they have four children to send to college.
“It is going to be harder for them to go. They will probably have to borrow money and come out with student debt,” Vaclav said.
The tax revenue from the 529 plans would fund a permanent $2,500 tax credit for families to use for education expenses. The President says that would do more to help the middle class.
“You can’t pretend there is nothing we can do to help middle class families get ahead because I’ve seen what we can do to help middle class families get ahead when we make an effort. The answer can’t just be no to everything,” Obama said.
Valley congressman Bill Johnson says the move is going in the wrong direction.
“That is his consistent theme – redistribute the wealth. Penalizing those who have worked hard. We ought to be making it easier to send kids to college, not harder,” Johnson said.
The proposal isn’t expected to have much of a chance in the Republican controlled House and Senate.
WYTV News contacted Congressman Tim Ryan’s office for comment, but he was attending a funeral and could not respond.