WASHINGTON — White House officials say they are seeking to dismantle a popular college savings tax break because it favors wealthy households and does little to encourage lower-income students to go to college. The proposal would mean that withdrawals from so-called 529 college savings plans for tuition would no longer be tax-exempt. Republicans say that would be a middle-class tax increase.
“Overwhelmingly, this plan provides much more of a tax incentive, much more assistance through the tax code to go to college than anything that we have in our system now,” said Jason Furman, chairman of the White House Council of Economic Advisers, at a meeting Friday with Bloomberg reporters and editors in Washington.
“The current 529 is very tilted towards the upper end, and a variety of research has shown it’s ineffective in serving its goals of getting people to go to college who wouldn’t otherwise have gone,” he said.
The proposal, which stands little chance of advancing in Congress, would apply only to new contributions. That means any money in accounts before it takes effect would still qualify for the tax break.
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