WH on defensive over college tax break

The White House is defending its efforts to roll back a tax break for college savings against critics who say the proposal hurts the middle-income families President Obama wants to assist.

{mosads}Obama proposed taxing withdrawals from 529 accounts, named for their section of the tax code, as part of his recent plan that also seeks to offer students the chance at free community college.

Administration officials have said that allowing tax-free withdrawals from 529 accounts generally helps higher-earning families, so their proposal is consistent with the president’s broader plan to tax the wealthier in order to increase benefits for the middle class.

“If you look at the reforms that the president put in place for a whole host of tax programs that benefit middle-class families and make a college education more affordable, that would yield a $50 billion tax cut for middle-class families,” Josh Earnest, the White House press secretary, said Friday.

“And that is reflective of the president’s commitment to make a college education accessible to every middle-class family.”

Earnest also stressed that the White House would only consider the changes to 529 accounts, which would apply to new contributions, as part of his wider education plan. Obama is also seeking to extend the American Opportunity Tax Credit indefinitely, a top priority for Democrats that expires in 2017 and helps with education expenses for families making up to $180,000 a year.

Top GOP lawmakers have dismissed Obama’s broader plan while also criticizing the administration’s arguments for overhauling the college savings accounts.

“Hardworking, middle-class Americans who are sacrificing to save for their children’s education beg to differ, and they’re not the only ones who aren’t buying the White House’s spin,” Speaker John Boehner’s (R-Ohio) office said in a statement Friday.

House Majority Leader Kevin McCarthy (R-Calif.) tweeted Friday that Rep. Lynn Jenkins (Kan.), a member of GOP leadership, was preparing bipartisan 529 legislation that would keep withdrawals tax-free.

“It’s a constant fear in every parent’s mind that they should be doing more to save for college for their kids,” Ryan Ellis of Americans for Tax Reform wrote this week. “When the White House released a plan to tax 529s, they were really attacking the ‘I’m a good parent’ check box that the middle class has here.”

Liberal groups have come to the defense of Obama in recent days, agreeing that tax breaks for higher education give a disproportionate benefit to the rich now. Robert Greenstein of the Center on Budget and Policy Priorities noted this week that legislation in the last Congress from Reps. Diane Black (R-Tenn.) and Danny Davis (D-Ill.) also sought to streamline the incentives to make them more accessible to the middle class.