Washington The Obama administrations decision to backtrack on a tax proposal that would have gutted a popular college savings plan is a telling moment for this White House. At its heart lie perceptions of who is middle class.
The episode also raises questions about Obama White House coordination with Democratic leaders on Capitol Hill, who came out against the plan (as did Republican leaders and families saving for college).
As part of proposed changes to the tax code, Mr. Obama wanted to end some of the tax advantage of so-called 529 college savings accounts. Millions of Americans have such accounts, though ownership skews toward better-off families. White House economists had concluded that other education tax breaks would do more for the middle class than 529s.
But the outcry against the 529 switch was swift and not just from families and Republican leaders. Top Democrats, including House minority leader Nancy Pelosi and House Budget chairman Chris Van Hollen, advised the White House to drop the proposal. Leader Pelosi reportedly pressed senior administration officials on the matter Tuesday while flying on Air Force One with the president between India and Saudi Arabia. Tuesday afternoon, the administration relented, calling the pushback a distraction.
Obama had only unveiled the plan the weekend before his State of the Union address on Jan. 20. In relenting so quickly, the administration was cutting its losses. But the episode has also given the Republican Party a lifeline as it seeks to portray itself as a friend of the middle class.
Democrats are in real trouble heading into 2016 if they think raising taxes on middle class families counts as middle class economics, Republican National Committee Chairman Reince Priebus said in a statement.
Obama focused heavily on middle class economics in his latest State of the Union address. But that emphasis and now the 529 kerfuffle only begs the question: What is the middle class?
The short answer is that theres no universally agreed upon definition. So that leaves those making the arguments to set their own. And in politics, thats a gift: The middle class can be whatever you say it is.
The vast majority of Americans consider themselves middle class, including most of those whose income puts them in the top fifth of American earners. So even if the 529 plans disproportionately benefit those with higher incomes, calling those people wealthy and not in need of some kind of incentive to save for the childrens college education felt like a slap in the face.
The second reality for the Obama 529 switch was that opponents were able to quickly attack one aspect of the plan, and the administration never recovered.
Original post:
Obama's misfire on 529 college savings plan: Who is middle class? (+video)