Tag Archives: taxes

Death to the 529 / long live the 529

Obama flip-flops faster than I can blog!  Prezzo has already walked back his proposal to change the 529 college-saving tax break, but I have a post about it queued up, and by gum I’m gonna publish it.

Here’s the plan that just got shelved.  From now on, capital gains on contributions you stow in a 529 plan won’t be tax free anymore — they’ll just be tax-deferred, as with a retirement plan.  In essence, it takes away a tax break whose benefit flows predominantly to high-income families (some 529 money is held by middle-income parents, but under Obama’s plan the $500 or so they’d lose on their 529 was more than offset by an AOTC expansion.)

OK, this Congress is as likely to roll back a tax break for high earners as they are to rename Reagan National Airport after Pete Seeger, so this isn’t actually happening, but I’m just saying, that’s the plan.

People are mad, and feel like they’ve been bait-and-switched. My FB feed, populated by dutiful savers like me, is full of ire. Mark Kantrowitz, in the New York Times:

He went as far as saying that the proposal could be characterized as a broken promise. “People saved money in 529 plans because of the expectation that the favorable tax treatment would continue,” he said.

But why does the New York Times let Mark Kantrowitz say this when it’s plainly not true? I saved money in a 529 plan. And the favorable tax treatment for that money will continue. When I take it out, I won’t pay a dime on any capital gains.

For money I put in later, it’s another story. But so what? If something’s on sale today, nobody’s breaking a promise to me when it’s not on sale tomorrow. I guess it’s strictly true that the proposal “could be characterized as a broken promise.” But it would be better to say it “could be characterized as a broken promise by people who don’t mind characterizing things as different things.”

A broken promise would look more like a state government defaulting on money it owes the thousands of middle-class taxpayers whose pensions it mismanaged.

 

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Guilt pangs

Not even going to link to this article but this is so magnificently dumb I had to share it with someone.

As everyone knows by now, GM’s entry into the electric car market–the Chevy Volt–costs $41,000 before tax breaks. After the tax breaks, you can happily drive one off the lot for $33,000 … if you can ignore those guilt pangs knowing your fellow Americans have chipped in $8,000 to your new ride.

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At least he didn’t say it was a quantum leap

From the New York Times, wealthy suburban parents in full revolt against paying for schools:

Some residents argue that the town should be more businesslike, cutting other costs to offset the outlay for smaller classes. Peter P. Pulkkinen is one. A 40-year-old investment banker, he and his wife, Sarah, moved here in 2004 from the Upper East Side and their two oldest children are now in the first and third grades. He wants small classes for them. But rather than raise taxes, he would restrict teacher compensation— particularly their benefits.

Displaying a sheaf of charts and projections that he and a friend prepared for a school board meeting, Mr. Pulkkinen said in an interview that if property taxes continued to rise in Bronxville at roughly the trajectory of the last decade, they would double by 2020 — and by 46 percent in the unlikely event the “austerity budgets” of the last two years continued through the decade. “I think it is a false paradigm to have to choose between radically diminished services or exponentially higher taxes,” he said, “without first addressing the structural issue of teacher compensation.”

I would advise against investing any money with a banker who doesn’t know what”exponentially” means.

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