President Obama on Friday explained his decision to abandon efforts to tax popular college savings plans, saying the political stress surrounding his proposal exceeded the fiscal gains.
“It wasn’t worth it for us to eliminate them,” Obama said about the 529 plans at an event in Indianapolis.
“The savings weren’t that great,” he added. The 529 plans “will not change at this point.”
The White House surprisingly dropped a plan to tax the college savings plans in the face of stiff opposition from Republicans and even some senior Democrats.
Obama intended to levy taxes on 529 plans to pay for a larger college tax credit, with his aides defending the move by arguing that mainly higher-earning families rely on such savings.
But the political downside of the idea was on full display Friday, when a woman in the Indianapolis audience mentioned that she relied on the plans.
Obama pointed out that a tax on the 529 plans would apply only to accounts opened in the future. However, he acknowledged that a sizable amount of people viewed his proposal as “extreme.”
Some progressives, though, were not happy with Obama’s about face, saying it undermined the president’s bid to raise taxes on wealthier Americans.
