Wednesday, April 13, 2022
Haneman: Dynasty 529 Plans And Structural Inequality
Victoria J. Haneman (Creighton; Google Scholar), Dynasty 529 Plans and Structural Inequality, 62 Washburn L.J. ___ (2022):
The tax benefits accessible by means of 529 accounts, such because the potential for perpetual tax-free progress, have been maximized by the wealth protection business that operates to the benefit of excessive revenue and wealth households in the USA. This essay is extra a thought piece than a polemic, with the objective of beginning a dialog on an vital concern not usually mentioned: a 2018 change to the 529 construction slipped into the Tax Cuts and Jobs Act (TCJA) has basically turned 529 plans right into a government-subsidized college voucher scheme for the rich. By this modification, the dynasty schooling belief has turn out to be an much more enticing umbrella below which a number of 529 accounts could also be managed by an prosperous household to pay not only for school but additionally all non-public college (Ok-12) on a tax-sheltered foundation.
Conclusion
In 2008, Barack and Michelle Obama made $2.66 million and contributed $240,000, or 5 years of front-loaded contributions, into two 529 plans—one every for daughters Malia and Sasha Obama.50 In 2015, President Obama proposed the elimination of 529 plan tax subsidies and was criticized mercilessly for “having gotten [his] full tax benefit from 529 plans.” The fact is that putting 1 / 4 of 1,000,000 {dollars} right into a tax-sheltered college-savings account can not fail however draw one’s consideration to the way in which through which the Inner Income Code is working to the benefit of the privileged. And on the time of this proposal, these with incomes above $200,000 made up 6% of households however managed 70% of the balances in 529 plans. The overwhelming bipartisan opposition to President Obama’s proposal to repeal 529 plan tax subsidies prompted him to backpedal away from the concept.
Now we have accepted the notion that instructional incentives must be supplied by the federal government to middle-income households, however it’s deeply problematic if these incentives entrench slightly than mitigate class divisions. Recognizing political opposition, this thought piece affords a realistic strategy to the curtailment of advantages that avoids the stamp “middle-class tax hike” that seemingly blocked President Obama’s 2015 proposal, whereas sharply disincentivizing the usage of 529 plans for dynastic functions.
https://taxprof.typepad.com/taxprof_blog/2022/04/haneman-dynasty-529-plans-and-structural-inequality.html
