Senate panel votes to expand education benefits

The Senate Finance Committee unanimously cleared a measure Wednesday that would expand tax-free accounts for college education and make them easier to use.

The tax-writing panel’s vote moves the measure one step closer to President Obama’s desk, just months after the White House proposed paring back the so-called 529 accounts.

{mosads}Wednesday’s vote didn’t happen until the evening, hours after the Finance Committee recessed a morning mark-up so senators could attend a speech from Prime Minister Shinzo Abe of Japan.

Senior senators from both parties are sponsors of the education bill, but the Finance consideration of the legislation was not without partisan tension. Finance Chairman Orrin Hatch (R-Utah) worked to keep his fellow tax writers from changing the 529 bill, which passed the House in February by a 401-20 margin.

Keeping the bill identical to the House measure, Hatch said, would allow Congress to more quickly “get this section of the tax code working for everyday Americans trying to improve educational opportunities for the next generation.” 

But for Democrats, that approach was akin to allowing House Republicans to run the Senate and the Finance Committee. Sen. Ron Wyden (Ore.), the panel’s top Democrat, said it “defies common sense” that the committee turned away amendments that enjoyed support from Republicans.

“This is a perfectly fine bill,” Wyden said, before wondering why Republicans weren’t interested in the traditional method of reconciling the differences between a House and Senate bill.

“This is not some urgent national security matter that has to be passed in a matter of minutes,” Wyden insisted about a bill that congressional scorekeepers estimate would cost just $51 million over a decade.

Under the 529 legislation, students would have more freedom to use the accounts to purchase computers or Internet access. The measure would also reduce paperwork burdens related to the accounts, and make it easier for families to deposit refunds from schools back into their accounts.

Some GOP tax writers suggested they would like to expand the bill even further once it hits the Senate floor, even as they went along with Hatch’s efforts to make no changes at Wednesday’s mark-up.

Sen. Rob Portman (R-Ohio) expressed an interest in an amendment from Sen. Debbie Stabenow (D-Mich.) that would give students online information about what tax incentives for education might be available to them. But Portman voted against the amendment at the , which fell on a party-line vote.

Sen. Mark Warner (D-Va.) decided against offering his proposal, authored with Sen. John Thune (R-S.D.), that would give employers more of an opportunity to help their staff pay off student loans with pre-tax dollars.

Other Democratic amendments turned away by Republicans included a proposal to not count money from 529 accounts as income when testing eligibility for welfare benefits.

Earlier this year, Obama was forced to back away from his proposal to tax withdrawals from 529 accounts, which he said are currently tilted too much toward higher earners.

Conservative and education groups, not to mention Republicans, knocked that proposal as a tax increase on the middle class. But senior Democrats, like House Minority Leader Nancy Pelosi (Calif.) and Rep. Chris Van Hollen (Md.), also urged the White House to back away from the changes to the popular program for college savings.

Despite the president’s earlier proposal, the White House has said that it doesn’t oppose the current congressional plan to expand 529 accounts – which passed the House with a strong veto-proof majority.

Josh Earnest, the White House press secretary, said in February that the administration does “look forward to working with Congress on more ambitious, fiscally responsible education policies that would actually do more to improve college access and affordability.”

Wyden made a similar point at Wednesday’s mark-up. “When it comes to college affordability, there is a lot of wood left to chop. And it would be a mistake to leave the rest of the woodpile sitting,” he said.

This post was updated at 8:05 p.m.