The tax system overhaul passed just before Christmas hit an unexpected bump just hours after House lawmakers finished celebrating their historic vote. Several items ran afoul of Senate procedural rules and had to be pulled from the bill before final approval. One of those directly affected homeschooling families.
Under the bill, lawmakers expanded 529 educational savings accounts to include private K-12 schooling. They also attempted to include homeschool expenses, a tax benefit the Home School Legal Defense Association (HSLDA) has lobbied for since 2000.
“We were an inch away from victory,” said William Estrada, HSLDA’s director of federal relations.
Although a procedural hiccup ultimately killed the provision, the vote put every single Democrat in the Senate on record of opposing a tax break for homeschoolers, Estrada said. That squelches hope for getting the measure passed anytime in the near future. Rep. Luke Messer, R-Ind., plans to submit a bill in the House, something he’s done every year, and Sen. Ted Cruz, R-Texas, has offered to sponsor a measure in the upper chamber. But getting something passed will be a “tough row to hoe,” Estrada said, mostly because of the Senate’s 60-vote threshold.
While homeschoolers eagerly anticipated the tax advantages 529 plans offer, not all school choice advocates support expanding the accounts to cover K-12 education. The benefits only apply to families who have large chunks of money to set aside, making the 529 expansion primarily a gift to the wealthy. Parents able to set aside small amounts of money each month to save for college can still do that, and reap the benefits over time. But because interest accrues slowly, any gains from small, regular savings would be wiped away if parents pull money out of the accounts to pay for anything before college.
Expanding the 529 plans could also backfire in two big ways. First, private schools could look at the tax savings as “found money” and raise tuition to take a piece—or all—of those funds. Wealthy families might be able to pay more, but families who sacrifice to set aside enough money each month for tuition payments could be priced out. Families diligently saving for college whose children get some form of financial assistance to attend private school also could see those scholarships cut now that schools can take a piece of an established 529 account, even if the parents don’t want to use that money now.
Another unintended consequence: Skewing 529s to benefit wealthy families could make them a target for a future Democratic administration. President Barack Obama tried to limit the tax benefits for 529 plans in 2015, but because they helped parents across all but the lowest income brackets, he couldn’t whip enough support. That might change once families start using the plans to pay for private school. One 529 administrator told The New York Times she now considered the plans a “sitting duck” for lawmakers eager to strip government benefits from wealthy taxpayers.
Courtesy: WORLD News Service
Photo courtesy: Flickr.com
Publication date: January 5, 2018