• Guest, The rules for the P & N subforum have been updated to prohibit "ad hominem" or personal attacks against other posters. See the full details in the post "Politics and News Rules & Guidelines."
  • Community Question: What makes a good motherboard?

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

Page 8 - Seeking answers? Join the AnandTech community: where nearly half-a-million members share solutions and discuss the latest tech.

DCal430

Diamond Member
Feb 12, 2011
6,021
9
81
This really hurts people in California, as we already had free community college for the middle and lower income people.
 

Jhhnn

No Lifer
Nov 11, 1999
61,131
13,071
136
This really hurts people in California, as we already had free community college for the middle and lower income people.
Obama's proposal extends free community college to everybody, iirc. I don't understand how anybody is losing in that regard.
 

OverVolt

Lifer
Aug 31, 2002
14,285
87
86
Obama's proposal extends free community college to everybody, iirc. I don't understand how anybody is losing in that regard.
Oh you are such beyond hope, lol. They should make vegetables free. For the health benefits you know?
 

Fern

Elite Member
Super Moderator
Sep 30, 2003
26,916
172
106
Obama's proposal extends free community college to everybody, iirc. I don't understand how anybody is losing in that regard.
I think his complaint is more about how they aren't gaining anything. He's angry about missing out on the gravy train.

Fern
 

DCal430

Diamond Member
Feb 12, 2011
6,021
9
81
Before the change their was some reason for people in California to invest in a 529 plan and now their is none. It offers nothing that simply investing directly doesn't offer. There is no reason for it.
 

nickqt

Diamond Member
Jan 15, 2015
6,023
4,089
136
Before the change their was some reason for people in California to invest in a 529 plan and now their is none. It offers nothing that simply investing directly doesn't offer. There is no reason for it.
The changes are proposed, they don't exist yet.

That means that right now, 529s still function as they have since the last time they were changed in 2006.

Even if you know for sure that 529s will be changed, you can still frontload money into them for 5 years worth of contributions if you're so inclined/able.

And even if the proposed changes occurred, there would still be benefits, such as the growth in value would go untaxed. It's just that at time of withdrawal the money would be taxed. In essence, it's not making 529s useless, it's just making them much less useful.

http://www.irs.gov/uac/529-Plans:-Questions-and-Answers
 

Jhhnn

No Lifer
Nov 11, 1999
61,131
13,071
136
I think his complaint is more about how they aren't gaining anything. He's angry about missing out on the gravy train.

Fern
Well, if his income is above the current state cutoff, then he would gain something- a choice, even if he doesn't take it.
 

DCal430

Diamond Member
Feb 12, 2011
6,021
9
81
How is this better than a Roth IRA which grows tax free, and isn't subject to capital gains tax. A Roth IRA can also be used on education, as well as having the advantage of not counting against your fafsa, unlike 529 whixh count against your financial aid.
 

OverVolt

Lifer
Aug 31, 2002
14,285
87
86
I think his complaint is more about how they aren't gaining anything. He's angry about missing out on the gravy train.

Fern
Um free vegetables would cause a shortage of vegetables ironically by screwing up the supply and demand curve, but I was just having fun watching it predictably go woosh over his head, honestly.
 

nickqt

Diamond Member
Jan 15, 2015
6,023
4,089
136
How is this better than a Roth IRA which grows tax free, and isn't subject to capital gains tax. A Roth IRA can also be used on education, as well as having the advantage of not counting against your fafsa, unlike 529 whixh count against your financial aid.
It's not that it's better. It's that it is another shelter that can be used.

You can open a 529 for your neighbor's uncle's kid. You can also switch the beneficiary to whomever you want without tax penalties.

Shelters are shelters. They are there to be used. The more shelters, the more money that can be sheltered.
 

Jhhnn

No Lifer
Nov 11, 1999
61,131
13,071
136
Um free vegetables would cause a shortage of vegetables ironically by screwing up the supply and demand curve, but I was just having fun watching it predictably go woosh over his head, honestly.
Inane. Financing merely flows from different directions. It's not actually free in the sense that anybody is giving it away. Not to mention that demand leads supply in a growth scenario.

Well, unless you're saying that an increase in demand for higher education would be a bad thing... that you're willing to forego any sort of "skills gap" argument when it comes to unemployment.

It does kinda level the playing field between the privileged & non-privileged, apparently being a source of resentment for some.
 

WackyDan

Diamond Member
Jan 26, 2004
4,794
68
91
First and foremost, according to what I'm reading this would only apply to new contributions. Therefore, everyone worried about them changing the rules of the game on you were wrong.
Considering we have 14 years until my daughter potentially goes to college, I'm not sure why you'd think I shouldn't be concerned, or others be concerned about the implied change to 529's.
 

MongGrel

Lifer
Dec 3, 2013
38,751
3,064
121
Considering we have 14 years until my daughter potentially goes to college, I'm not sure why you'd think I shouldn't be concerned, or others be concerned about the implied change to 529's.
Considering I have no kids, I really don't care to much honestly, other than I see a free salad might be involved somewhere.

More of my tax dollars I can't delegate somewhere I don't care about.
 

shira

Diamond Member
Jan 12, 2005
9,574
5
81
That is all fine and dandy except people were sold on it being tax free. Now Obama wants to tax it. Regardless of how many get dinged. It is immoral for a program to be sold for decades on a premise. Then to yank away its premise to pay for something else.
How is this any different from pensions of all of the state and local employees that the governmentsare cutting because they've become too expensive. Conservatives near and far think it's fine and dandy to cut these pensions. Isn't that a hundreds times more immoral than changing tax rules?
 

WackyDan

Diamond Member
Jan 26, 2004
4,794
68
91
There it is again. Someone who can afford to pay out of pocket $60K/year for college and has over $1.2 million in savings thinks he is middle class.
Whoa... I have my confrontations with BShole too... But I'm not sure how old he/she is and if they have 1.2 mil in retirement accounts then good on them. 1.2 million in retirement accounts does not make you rich... it might make you more secure than most but not rich. Considering that you can't touch 401k, IRA's without a stiff penalty and you can't withdraw until a set age I could give a shit. It is entirely possible that he has that amount or is projecting that amount at time of retirement. Next he'll have to ration that out to himself yearly to pay for medical, bills, fun, etc. and make it last for the last 20-30 years of his life buffered by his SS checks and what ever else he has. I call that smartly done.

Yes, upper middle class if they got a good early start on their career and earnings can indeed have that much saved... Especially if they didn't go out and buy the McMansion, the 5 series BMW and all that garbage. Good on him.

That said I have a co-worker (professional sales) who plans on retiring at 55. He is 51 now and is planning on hitting $5 million in retirement savings by 55 - He is worried that $5 mil won't be enough. He lives in a modest house, drives a 12 year old car. When he was 14 years old, his uncle sat him down every six months from there on and calculated his net worth... I'd say that lesson stuck with him... But $5 mil? Yeah... It will last... I hope he learns how to have some fun at that point.
 

WackyDan

Diamond Member
Jan 26, 2004
4,794
68
91
You are correct. Thank you for that. Depending on where you live, your state may allow a portion of contributions to be tax exempt.
As an aside to that. Yes, some states allow you to deduct part of your yearly contributions. Some do not. Some don't allow you if you are over a certain income amount.

Here in NC they allow a deduction. The tax incentive in NC was pretty meaningless when looking at how the NC fund performed. It is one of the bad ones. It made financial sense to invest in the Utah fund. (Alaska, Nevada and some others are also decent).
 

WackyDan

Diamond Member
Jan 26, 2004
4,794
68
91
Because they're still a tax advantaged way to invest above and beyond IRA's, 401K's & so forth. I rather suspect that those who use 'em, for the most part, also max out their other methods as well.
To save for education yes. 529's are not a standard investment vehicle... ie; don't use it for education and cash out... the penalty isn't worth it. A 529 as some sort of shelter is pretty stupid unless you want to contribute $14k a year to your kid's college fund assuming they are going to go to the most expensive school for the most expensive degree.
 

nickqt

Diamond Member
Jan 15, 2015
6,023
4,089
136
To save for education yes. 529's are not a standard investment vehicle... ie; don't use it for education and cash out... the penalty isn't worth it. A 529 as some sort of shelter is pretty stupid unless you want to contribute $14k a year to your kid's college fund assuming they are going to go to the most expensive school for the most expensive degree.
Shelters are a method of estate planning. None of them are stupid to use, although some are more valuable than others.

Part of estate planning is if you have millions of dollars, you want to "give away" as much as possible to people you want to have your money. If you do it right and use shelters, you can give away a lot more without paying taxes on it.

Another part, for the non-rich, is to get money to a relative/friend without it having to go through probate, which happens whether you die with a will or not.

http://www.savingforcollege.com/intro_to_529s/are-there-gift-and-estate-tax-benefits-for-529-plans.php
 

WackyDan

Diamond Member
Jan 26, 2004
4,794
68
91
Note that if community colleges were free like Obama is also proposing, that would already save anyone willing to go to one for two years before transferring to a state school something like $24k/yr x 2 = $48k. That's a conservative estimate, could easily be $60k+. 529 plans would be far less important (though still useful).
They would still be VERY important.

If I am able to contribute $100 per month like I have since I opened my daughter's 529.. over the 17 years I have the account there will be roughly $20k of contributions... Provided I can keep affording to contribute or don't get laid off, etc. I'm not sure what the gains will be, but lets assume modestly and at the end of 17 years we have $30k.

I'll invite you to google 529 calculators and see what they tell you. Most I think are over speculating on what college will cost in 17 years.

That said, in 17 years if my daughter does do community college first, we are looking at a shit ton more than the current NC state $16k in tuition a year (worse case) based on 17 years of inflation and tuition continuing to bubble up. I honestly don't even know what the full cost could be that far out.

Either way, my hope is to minimize my daughter's need to go deep in debt for an education as well minimize our need to supplement her tuition at a time when I am retirement age. (We had her late in life)
 

WackyDan

Diamond Member
Jan 26, 2004
4,794
68
91
How is this better than a Roth IRA which grows tax free, and isn't subject to capital gains tax. A Roth IRA can also be used on education, as well as having the advantage of not counting against your fafsa, unlike 529 whixh count against your financial aid.
The Roth is used for YOUR education correct? Not your child's? I'm unclear on that.

You can actually start a juvenile IRA at age 14, but the contributions have to come from the child's income ( babysitting, mowing lawns, working part time) and be detailed via a form to the IRS yearly. Allowances, etc can not be used as contribution or detailed as such... So a juvenile IRA is essentially useless for college savings as you don't get up to 18 years of gains.
 

WackyDan

Diamond Member
Jan 26, 2004
4,794
68
91
Considering I have no kids, I really don't care to much honestly, other than I see a free salad might be involved somewhere.

More of my tax dollars I can't delegate somewhere I don't care about.
Your tax dollars currently have nothing to do with 529's... Zilch... Nada. So yes, you are right about not needing to care.
 

WackyDan

Diamond Member
Jan 26, 2004
4,794
68
91
Shelters are a method of estate planning. None of them are stupid to use, although some are more valuable than others.

Part of estate planning is if you have millions of dollars, you want to "give away" as much as possible to people you want to have your money. If you do it right and use shelters, you can give away a lot more without paying taxes on it.

Another part, for the non-rich, is to get money to a relative/friend without it having to go through probate, which happens whether you die with a will or not.

http://www.savingforcollege.com/intro_to_529s/are-there-gift-and-estate-tax-benefits-for-529-plans.php
Quite frankly, if you are that rich you set up an off shore family trust and call it done... Ala The Kennedy Family.

Yes, I get your point... In those cases the penalty is moot as you are still able to give it away and obscure it from the rest of the estate.

That said, I highly doubt the middle class or the upper middle class is even in the league to do that with a 529.
 

nickqt

Diamond Member
Jan 15, 2015
6,023
4,089
136
Quite frankly, if you are that rich you set up an off shore family trust and call it done... Ala The Kennedy Family.

Yes, I get your point... In those cases the penalty is moot as you are still able to give it away and obscure it from the rest of the estate.

That said, I highly doubt the middle class or the upper middle class is even in the league to do that with a 529.
I think 529s should remain as they are. Also, I highly doubt that the proposed changes actually occur. And, if they don't, perhaps middle class people who should be using them will be slightly more inclined to learn about them and actually start using them in larger numbers.

Thanks, Obama! :p
 

ASK THE COMMUNITY