this episode and the swift bipartisan opposition it generated is so revealing, not only about the short term political instincts of the Obama administration, but about the longer term political and policy dynamics of sustaining the welfare state.
He is writing about President Obama’s proposal to tax savings from “529 plans” for college saving, which the Administration has since backed away from. I read Suderman as saying that the larger point is that when it comes to unsustainable fiscal policy, we have met the enemy and he is us. My comments:
1. Re-read Lenders and Spenders. Government debt inevitably leads to political strife.
2. 529 plans are regressive. Nearly all of the benefit flows to people with high incomes.
3. 529 plans are yet another enabler for colleges to boost tuitions.
4. 529 plans subsidize affluent people for doing what they would have done anyway–send their kids to exclusive, high-priced colleges.
529 plans are terrible public policy. Instead of demagogically criticizing the Administration’s proposal to tax them, I would say let’s get rid of them altogether.
Well, plenty of bloggers inform me that the gov’t exists to subsidize wealthy people, so then this is just standard operating procedure.
He is just raising taxes. So let’s get rid of them AND demagogue him.
Is there any good tax expenditure?
529 plans are regressive. Nearly all of the benefit flows to people with high incomes.
Next time, Indiana Jones, it will take more than children to save you!
Think of 529 plans as a partial move towards non-taxation of savings, which is necessary to neutrality. The income tax should not bias in favor of current consumption over savings, which is what taxing savings does.
Thoughts on this piece from Reihan Salaam?
http://www.slate.com/articles/news_and_politics/politics/2015/01/the_upper_middle_class_is_ruining_all_that_is_great_about_america.single.html
A secondary feature of these plans is that many are heavily fee laden and advisor managed.