A day after dropping its proposal to tax “529” college savings plans, the Obama administration claimed it still considers the tax to be good policy.
White House deputy press secretary Eric Schultz called the tax “bold” after Obama’s decision not to go ahead with it, saying the proposal had become a distraction.
Several Democrats, including House Minority Leader Nancy Pelosi, D-Calif., had pressed senior administration officials to drop the proposal while flying with Obama on Air Force One from India to Saudi Arabia Tuesday.
Schultz said only that the conversations between Obama, Pelosi and others on the issue were “indicative of the distraction that this was becoming.”
“The president put forth a bold proposal to make college more affordable for all Americans,” Schultz told reporters at the White House daily briefing. “He didn’t want this to be a stumbling block that would jeopardize the rest of the package.”
When asked directly if White House officials still regarded the tax “good policy,” Schultz said, “Sure, we do,” adding that it was only a small piece in a much broader plan aimed at giving the middle class more than $50 billion in tax cuts.
Pelosi and others argued that the new tax on such a popular middle-class program for families saving for their children’s college educations would undermine Obama’s message promoting more affordable higher education.
States sponsor the “529” plans, which are run by private investment management companies. Parents can place money into the account over years and withdraw it tax-free to pay for college education expenses.
But critics of the plans point to a 2012 government report showing that only 3 percent of U.S. families were using the plans and that those who did had higher incomes than those who did not.
