Here's the White House spin on that controversial plan to end tax benefits for 529 plans
Basically, they say the 529 element is one piece of a larger package.
"The President¹s education tax packageis a large net tax cut for students," according to background provided to CNN's Jim Acosta by an administration official.
With nearly $50 billion more going to help students and middle-class families pay for college over the next decade. Under the President¹s plan, every dollar saved from consolidating and curbing inefficient education tax breaks and tens of billions more is ploughed right back into higher education tax benefits for students and middle-class families. In particular, families with incomes of up to $180,000 will be able to benefit from the expanded AOTC. And the President¹s investments are above and beyond the middle-class tax cuts he¹d retain by making the AOTC permanent.
Specifically, these plans will still receive favorable tax treatment in two ways: Families will still be able to benefit from deferral. In other words, no tax will be owed on the earnings until they are withdrawn. Additionally, the earnings will be treated as income to the beneficiary. In many cases, the student beneficiary faces a much lower tax rate than the parent or other benefactor who owns the savings account.