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The Daily Tar Heel

President Obama's community college proposal tough to afford

A 529 savings plan is a savings account run by a government agency with incentives designed to make it easier for parents or guardians to save money for college for their kids, according to the Internal Revenue Service.

These savings accounts have not been taxed since 2001, when the Bush administration lifted the tax. Both parties and middle class Americans led the backlash against Obama’s plan.

Obama said the owners of 529s were the wealthy upper class, but it turns out that many account holders are middle-class Americans. Among those owning the savings plans, 10 percent are from households making less than $50,000 a year, and 70 percent of the families have incomes less than $150,000.

Michael Bitzer, provost and professor of political science at Catawba College, was surprised the Obama administration came up with the tax.

“With the perception that there is a shrinking middle class, any proposal that might have a direct impact on that group, I was pretty surprised that the administration tried to do that,” he said.

Bitzer said the Obama administration attempted to sell the plan as a tax on the wealthiest Americans.

“But I think the reaction against the proposal — by both Republicans and Democrats in the Congress — was that no, (not adding the tax) is something that is really going to help the middle class,” Bitzer said.

Mary Morris, chairwoman of the College Savings Foundation, was proud of the large number of people who opposed the tax.

“I like to think it’s because there was a groundswell of support for 529 programs,” Morris said. ”(The movement came) from Congress, from those of us in the 529 industry and most importantly from our account owners, who spoke out quickly and vocally that these services are helping millions of families.”

She said 529s particularly help middle-class American families trying to refrain from using student loans.

“If we’re worried about that as a society, any kind of savings that can benefit paying for college tuition and not have to take out loans should be a good thing,” Bitzer said.

Bitzer added that it was unlikely that the tax would have made it through a Republican-led Congress anyway.

“If this was a trial balloon, it got shot down quick.”

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