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Obama's Tax Increase on the Middle Class. YES, Increase

WackyDan

Diamond Member
Jan 26, 2004
4,794
68
91
Buried in Obama's proposed "tax cut for the middle class" is a proposed tax on 529 college savings plans. You know, those plans that make college/trade schools more affordable for the middle class? Yet, because they are investment savings plans, the Obama admin thinks that the stupid middle class won't even bat an eyelash at the hidden tax.

The 1% probably rarely utilizes these plans as an investment vehicle, yet here is Obama wanting to tax them. Why even have a 529 in your child's name then? Just invest the money as you normally would... It is going to get taxed anyway.

I guess community college is good enough for U.S. children according to Obama.

Yes, I'm ranting. I did everything right. When my daughter turned 1, I started depositing money in a 529 plan with a good history of return. Every month a small amount is debited out of my bank account and transferred there. It is for her to use tax free for education expenses. It will help us save for retirement while still insuring that we have done something for her college education (should she choose college). What she will have at 18 years old is up for debate, but it won't be a ton of money, we'll probably still have to help her, and she'll probably still have to work part time and perhaps take on college loans pending her choice of schooling.

I'm not the 1%. Thanks Obama! Or should I say... FUCK YOU.

http://www.forbes.com/sites/ryanellis/2015/01/19/obamas-new-state-of-the-union-tax-hike-on-middle-class-529-college-savers/2/

"After the tax law change (which was made permanent in 2006), amounts withdrawn to pay for college were totally tax free. 529 plans thus became a kind of Roth IRA for college savings–you didn’t get any up front tax break (except maybe on your state income tax), but you could rest assured that your college nest egg’s growth would face no taxation when it came time to make tuition payments."

"The Obama plan aims to turn back the clock, once again taxing earnings growth in 529 plans as ordinary income. This is a direct and clear tax increase on middle class families sacrificing to save for college, and it’s likely to result in a mass divestment from this type of savings."
 

Double Trouble

Elite Member
Oct 9, 1999
9,276
103
106
Buried in Obama's proposed "tax cut for the middle class" is a proposed tax on 529 college savings plans. You know, those plans that make college/trade schools more affordable for the middle class? Yet, because they are investment savings plans, the Obama admin thinks that the stupid middle class won't even bat an eyelash at the hidden tax.

The 1% probably rarely utilizes these plans as an investment vehicle, yet here is Obama wanting to tax them. Why even have a 529 in your child's name then? Just invest the money as you normally would... It is going to get taxed anyway.

I guess community college is good enough for U.S. children according to Obama.

Yes, I'm ranting. I did everything right. When my daughter turned 1, I started depositing money in a 529 plan with a good history of return. Every month a small amount is debited out of my bank account and transferred there. It is for her to use tax free for education expenses. It will help us save for retirement while still insuring that we have done something for her college education (should she choose college). What she will have at 18 years old is up for debate, but it won't be a ton of money, we'll probably still have to help her, and she'll probably still have to work part time and perhaps take on college loans pending her choice of schooling.

I'm not the 1%. Thanks Obama! Or should I say... FUCK YOU.

http://www.forbes.com/sites/ryanellis/2015/01/19/obamas-new-state-of-the-union-tax-hike-on-middle-class-529-college-savers/2/

"After the tax law change (which was made permanent in 2006), amounts withdrawn to pay for college were totally tax free. 529 plans thus became a kind of Roth IRA for college savings–you didn’t get any up front tax break (except maybe on your state income tax), but you could rest assured that your college nest egg’s growth would face no taxation when it came time to make tuition payments."

"The Obama plan aims to turn back the clock, once again taxing earnings growth in 529 plans as ordinary income. This is a direct and clear tax increase on middle class families sacrificing to save for college, and it’s likely to result in a mass divestment from this type of savings."
Wow, that's a huge middle finger to the middle class. The really wealthy have no need for 529 plans, and the poor can't afford to use them anyway. So who gets screwed? The middle class, that's who. Not to mention screwing everyone who put 529 money in for years based on the promise that it wouldn't be taxed if used to pay for college. Major "fuck you" to them for trying to do the right thing and saving up for their kid's college.

That's why in the other thread, when the OP posted that Obama was proposing a middle class tax cut, I said experience has taught me that when a politician says that, keep your eyes on your wallet.

Major "booooo" on that move.
 

nickqt

Diamond Member
Jan 15, 2015
6,023
4,089
136
529 Plans are almost always used by the 1%, since that's the term you've chosen to use.

How many people struggling to stay in the middle class are utilizing 529s? You claim that they aren't used by the rich (which they are, only stupid rich people who don't hire tax attorneys/estate attorneys/accountants don't use 529s to shelter income).

So, show a number of who uses 529s.

And community college is an excellent resource for Americans. You usually go there for 2 years for the "non-elective, non-major courses like English, Math, etc). Just because it isn't a 4 year scam college doesn't mean the professors there aren't able to teach well.

If you think that middle class people have all sorts of extra income to stash away in trust accounts like 529s, then fine, show their usage among the US population. Because most people in the middle class aren't stashing away thousands and thousands of dollars into tax shelters. They're using almost all their money to pay bills, maintain a decent standard of living, and sticking the rest into their personal checking/savings account.

So, care to provide some numbers on 529s? I'm interested.
 

WackyDan

Diamond Member
Jan 26, 2004
4,794
68
91
That article is bullshit. You can pick any state plan you want and you don't need a broker. You are able to choose a low fee plan and one with a good history of return.

I live in NC and picked the Utah plan and it has returned 12% each and every year for the last three years.

So Jhhnn... Who is right? Forbes or Bloomberg. You have a better response than the typical liberal shit you spew?
 

dullard

Elite Member
May 21, 2001
22,497
820
126
1) It hasn't been proposed yet.

2) It wouldn't pass congress if it were proposed.

3) The possibly proposed text in your link said that it applies to new contributions only (none of the money you put in so far or the gains would be taxed, ever, if your child uses it for education).

4) If proposed, if passed, and if you still put money in the 529, then your child would be taxed, at the child's tax rate, which is usually 0% or near 0% for a child in school. Of course, if your child is making $406,750 a year in school, then yes the tax bracket would be high.

For example, suppose the 529 plan you created has $4000 in principal and $2000 in gains for your child. She could then withdraw $1000 a year in principal (tax free) and $500 in gains (possibly taxable unearned income) each year. If she did that this year, and had no job, then she wouldn't have to file income tax forms since her unearned income was less than $1000. So, she would pay 0% tax even if the 529 gains were fully taxable.

5) Like a poster above linked, the 529 plans have been used almost exclusively by the upper middle class and the wealthy. The poor and middle class have no money to contribute or much better places to contribute it (such as a regular 401k, IRA, etc) than a 529 plan.
 
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WackyDan

Diamond Member
Jan 26, 2004
4,794
68
91
529 Plans are almost always used by the 1%, since that's the term you've chosen to use.

How many people struggling to stay in the middle class are utilizing 529s? You claim that they aren't used by the rich (which they are, only stupid rich people who don't hire tax attorneys/estate attorneys/accountants don't use 529s to shelter income).

So, show a number of who uses 529s.

And community college is an excellent resource for Americans. You usually go there for 2 years for the "non-elective, non-major courses like English, Math, etc). Just because it isn't a 4 year scam college doesn't mean the professors there aren't able to teach well.

If you think that middle class people have all sorts of extra income to stash away in trust accounts like 529s, then fine, show their usage among the US population. Because most people in the middle class aren't stashing away thousands and thousands of dollars into tax shelters. They're using almost all their money to pay bills, maintain a decent standard of living, and sticking the rest into their personal checking/savings account.

So, care to provide some numbers on 529s? I'm interested.
Yes all these accounts are just the 1%... WHo don't even need a 529 vehicle for college anyway... Yup.

http://www.collegesavings.org/includes/pdfs/June 2014.pdf

from

http://www.collegesavings.org/529PlanData.aspx

and in 2009 Obama was all for 529's apparently:
http://articles.latimes.com/2009/sep/13/business/fi-529-college-plan13

I'd also suggest the 5% of the middle class is a healthy number and we should encourage the use of 529's.
 
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Engineer

Elite Member
Oct 9, 1999
39,255
698
126
I'm waiting for them to tax Roth IRAs.
National sales tax. Regressive and taxes everything you spend, including your Roth or your traditional IRA. States replacing income taxes with sales tax already have this covered, especially those that tax food (Tennessee, etc).
 

WackyDan

Diamond Member
Jan 26, 2004
4,794
68
91
1) It hasn't been proposed yet.

2) It wouldn't pass congress if it were proposed.

3) The possibly proposed text in your link said that it applies to new contributions only (none of the money you put in so far or the gains would be taxed, ever, if your child uses it for education).

4) If proposed, if passed, and if you still put money in the 529, then your child would be taxed, at the child's tax rate, which is usually 0% or near 0% for a child in school. Of course, if your child is making $406,750 a year in school, then yes the tax bracket would be high.

For example, suppose the 529 plan you created has $4000 in principal and $2000 in gains for your child. She could then withdraw $1000 a year in principal (tax free) and $500 in gains (possibly taxable unearned income) each year. If she did that this year, and had no job, then she wouldn't have to file income tax forms since her unearned income was less than $1000. So, she would pay 0% tax even if the 529 gains were fully taxable.

5) Like a poster above linked, the 529 plans have been used almost exclusively by the upper middle class and the wealthy. The poor and middle class have no money to contribute or much better places to contribute it (such as a regular 401k, IRA, etc) than a 529 plan.
I know it has only been proposed and not passed.

I'm also pretty freaking familiar with how 529's work. The proposal would take away much of the benefit. The one article I posted cites that 5% of the middle class utilizes 529's. Is that a bad thing? 5% of what is still a large swath of people is a health overall number and it should be encourage to be even higher.

The liberals here see a conservative independent bitch about something this administration proposes that personally impacts the OP's child in a negative way and they get giddy - completely discount what the post is about. Their "What about the children?" wail gets forgotten for the convenience of their political agenda and partisan blinders.
 

dullard

Elite Member
May 21, 2001
22,497
820
126
National sales tax. Regressive and taxes everything you spend, including your Roth or your traditional IRA. States replacing income taxes with sales tax already have this covered, especially those that tax food (Tennessee, etc).
Bingo. The national sales tax idea is the biggest double taxation plan ever. Take all the money that you ever accumulated after tax, then tax it again.
 

nickqt

Diamond Member
Jan 15, 2015
6,023
4,089
136
Yes all these accounts are just the 1%... WHo don't even need a 529 vehicle for college anyway... Yup.

http://www.collegesavings.org/includes/pdfs/June 2014.pdf

from

http://www.collegesavings.org/529PlanData.aspx

and in 2009 Obama was all for 529's apparently:
http://articles.latimes.com/2009/sep/13/business/fi-529-college-plan13

I'd also suggest the 5% of the middle class is a healthy number and we should encourage the use of 529's.
I said that wealthy people use 529s because if you're wealthy, ostensibly you have hired an attorney or accountant who knows how to shelter income. I didn't say that only rich people use them. In fact, I believe I asked you to provide numbers of who actually used them, implying clearly that I don't know the actual numbers.

I know what a 529 is as I studied them and used them in an estate plan for an estate planning class I took. That said, your language that this is some huge massive tax increase for the entire middle class implies that the middle class as a whole is about to have its taxes increased, which may or may not be accurate depending on whether the middle class actually uses 529s in any substantial amount.

So, again, what percentage of Americans use 529s? Can you divide that number up into the 1% and the 99%, since you chose that category of people to ascribe the tax cut to? And, how much tax is being proposed? Is this some huge massive tax increase designed to send everyone struggling to remain in the middle class into poverty, or a small percentage tax increase depending on certain transactions.

529s are already subject to certain taxes, in case you weren't aware. So, be specific, otherwise this is just more boogieman tax cuts are comin' to get ya rhetoric.
 
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Double Trouble

Elite Member
Oct 9, 1999
9,276
103
106
1) It hasn't been proposed yet.
Perhaps not formally, but apparently this is part of the proposal. We'll have to see what the final one looks like.

2) It wouldn't pass congress if it were proposed.
... nor should it. I would definitely encourage my representatives to torpedo this as proposed.

3) The possibly proposed text in your link said that it applies to new contributions only (none of the money you put in so far or the gains would be taxed, ever, if your child uses it for education).
All that would do is to crush the 529 as a savings vehicle, it would go away pretty much instantly, bringing in no additional revenues. If that's the goal, just legislatively do away with the 529 plan.

5) Like a poster above linked, the 529 plans have been used almost exclusively by the upper middle class and the wealthy. The poor and middle class have no money to contribute or much better places to contribute it (such as a regular 401k, IRA, etc) than a 529 plan.
Based on the numbers I've seen, the average account has about $120k in it. That's not exactly the stuff of 1%'ers, though it is sizable.
 

Bowfinger

Lifer
Nov 17, 2002
15,776
392
126
[ ... ]
So Jhhnn... Who is right? Forbes or Bloomberg. You have a better response than the typical liberal shit you spew?
Before you get too sanctimonious, you might want to double-check your source. It is NOT a Forbes news article, or even an editorial by Forbes staff. It's an op-ed column written by a guy who works for Grover Norquist. (Forbes hosts it, but explicitly states his opinions are his own, not those of Forbes.) That doesn't prove he's being deceptive, but it should cause a thoughtful person to seek objective corroboration.

In particular, it seems odd he cited absolutely nothing showing how the "middle class" so widely takes advantage of 529's ... unless, of course, they don't much. I also noted his weaselly, "taxed at ordinary income tax rates, which can go as high as 39.6 percent." For the middle class? Right.
 

WackyDan

Diamond Member
Jan 26, 2004
4,794
68
91
529s are already subject to certain taxes, in case you weren't aware. So, be specific, otherwise this is just more boogieman tax cuts are comin' to get ya rhetoric.
Only if you exceed $14k in contributions per year or if you withdrawal for non educational purposes. How many middle class contributors are actually exceeding that?

In that same vein, how many rich people are plopping in the token 14K and how many are stupid enough to exceed that and pay the penalty. There are better vehicles for sheltering your money of you are rich. Considering the income tax PLUS 10% penalty you pay for withdrawal/closing out the account and not using it for school of some sort and it makes you wonder why the rich use them... Sure they should use them to fund the education for their kids, but to suggest they are using them as a shelter for vast sums of money is off the mark to say the least.

The average account has $20,671 in it. Yeah... That is rich alright. There are 11.83 million 529 accounts open. Of them, there is no distinction between how many are from the 1%/wealthy or middle class. One article puts it at 5% are middle class. So nearly 600,000 middle class families are doing the right thing and at least putting something away smartly for college but we don't know the methodology they use to determine that at all do we? It could be higher, perhaps lower. All we have is the treasury secretary making that statement. Where do those numbers come from? Would be interested to see something definitive eh?

http://www.collegesavings.org/includes/pdfs/Sept 2014 529 Report final.pdf

I find it odd the liberals bitch about college debt but find no fault with a useful college savings tool under threat by this admin.
 
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WackyDan

Diamond Member
Jan 26, 2004
4,794
68
91
5) Like a poster above linked, the 529 plans have been used almost exclusively by the upper middle class and the wealthy. The poor and middle class have no money to contribute or much better places to contribute it (such as a regular 401k, IRA, etc) than a 529 plan.
So now the "upper" middle class is the devil too. Nice to know.
 

WackyDan

Diamond Member
Jan 26, 2004
4,794
68
91
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Meghan54

Diamond Member
Oct 18, 2009
9,484
2,293
136
Before you get too sanctimonious, you might want to double-check your source. It is NOT a Forbes news article, or even an editorial by Forbes staff. It's an op-ed column written by a guy who works for Grover Norquist. (Forbes hosts it, but explicitly states his opinions are his own, not those of Forbes.) That doesn't prove he's being deceptive, but it should cause a thoughtful person to seek objective corroboration.

In particular, it seems odd he cited absolutely nothing showing how the "middle class" so widely takes advantage of 529's ... unless, of course, they don't much. I also noted his weaselly, "taxed at ordinary income tax rates, which can go as high as 39.6 percent." For the middle class? Right.

LOL!


And WD gets cut off at the knees.
 

WackyDan

Diamond Member
Jan 26, 2004
4,794
68
91
LOL!


And WD gets cut off at the knees.
How exactly? The tax is proposed. Fact. Middle class use the plans. Fact.

"Upon withdrawal, earnings were taxed at ordinary income tax rates, which can go as high as 39.6 percent."

Which is also fact. It shouldn't surprise anyone that if my daughter dies when she is 17 and I close the account that the funds are taxed at what ever my income rate is with my salary+ the proceeds/gains of the account at the time PLUS another 10% penalty on the gains in the account.

All that could put me into a higher tax bracket( As it should). Probably not the highest, but that is what is cited for example. If my daughter actually has more than I plan in there, actually works her way through college (probably), and is a dumbass cashing it all out because indeed - it is hers to do so with... Why would or should anyone be surprised that she'd be put into a higher tax bracket as then it would be classified as income?

Cut me off at the knees? Hardly.

It would seem that the vast majority of people here don't understand investing or 529's. I'
m not a guru, but am a fan of financial math. I have co-workers that make a great living and have 2 and 3 kids that don't have 529's... Are they stupid for assuming they can afford to help with or underwrite college when their kids are 18 and perhaps choose to go? Yes. Can't fix that.

One poster above even suggested that the value of 529's are minimal if community college is going to be free. So what? What about trade schools? What about those last two years of college? Those aren't expensive? What if the kid chooses as is their right to go to a four year school?
 

WackyDan

Diamond Member
Jan 26, 2004
4,794
68
91
Good to know that you aren't interested in a discussion but just ranting....

Now where is that how about a cup of rage pic?
If you read, you can see I am discussing this. Go away if you don't have anything constructive to add.
 

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