President Obama’s Robin Hood plan loses a step but the middle-class gains

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** Original article written by Michael “Vass” Vasquez at Binghamton Political Buzz Examiner.com **

Credit: The Daily Signal

The best laid plans of mice and men, as the saying goes. In this case it applies to the Robin Hood proposal made by President Obama during the State of the Union. In specific, the portion that President Obama omitted from the public address to the nation. The part on where he planned to get the money for the “free” college.

As is the case with any entitlement or program from the Government, the “free” 2 years of community college that President Obama teased the nation with is to be paid for by taxes. In particular the plan was to target the 529 college savings plans (as we disclosed in the article When Robin Hood is actually just a hood), which were created to allow tax free savings to pay for a child’s college expenses. The Obama Administration saw that as easy money to redistribute.

The problem is that while the White House took great pains to paint the picture that the only people to be affected by the new tax would be families with incomes of $200,000 or more, it wasn’t accurate. While the majority of those using the 529 plans are wealthier Americans, some 30% of families with 529 savings plans have incomes on $100,000 or less. According to the College Savings Foundation some 70% of the 529 accounts are in households of $150,000 or less. Therefore the Obama Administration wasn’t isolating economic success, but instead attacking anyone who had such a plan since it is not used widely enough for the liking of the Administration.

It should be noted that Senator Obama, in 2006 a year before he decided to run for the office he currently holds, voted in favor of the Pension Protection Act of 2006. This was the Bill that ensured the tax-free status of the 529 savings plans. The Bill passed the Senate with a vote of 93-5 (51 Republicans, 41 Democrats, 1 Independent all in favor).

Given the lame duck status of the President, his waning political clout, and a Republican Congress that despises the Democrat mantra of tax-and-spend, many saw this Robin Hood tactic as little more than a grab for improved approval ratings and a platform for the 2016 Presidential candidates. Complicating the matter further was the fact that even Democrats, like Rep. Nancy Pelosi and Rep. Chris Van Hollen and the powerful Senator Charles Schumer, had petitioned the President to back down from the new tax plan. This led to the challenge from the Speaker,

“And so, for the sake of middle-class families, the president ought to withdraw this tax increase from his budget when he submits it soon.” – House Speaker John Boehner, 1/27/15

To head off an embarrassing bipartisan defeat the White House has chosen to remove the new tax from the budget to be released on February 2, 2015. Speaker John Boehner has already lauded plans to step into the vacuum created by the White House as Rep. Lynn Jenkins put forward a bi-partisan proposal to expand the 529 credit as opposed to taxing it. This alternative is expected to be on the floor of Congress at some point in February. The White House is making the best of the situation stating,

“Given it has become such a distraction, we’re not going to ask Congress to pass the 529 provision so that they can instead focus on delivering a larger package of education tax relief that has bipartisan support…”

Currently, the plan to provide 2 years of “free” community college is still going forward. As stated by the White House, the proposed increase in capital gains taxes and estate taxes (also known as the death tax) will provide more than enough to cover the Robin Hood plan. Which leaves two questions to be asked:

  1. If the estate and capital gains tax increases will more than pay for 2 years of college, why did President Obama intend to still tax the 529 savings plans?
  2. Since the capital gains tax increase also directly affects millions of Americans, many in the middle class as well, does anyone think President Obama will have any better chance getting that passed through a Republican Congress?

2 Comments

  1. This is stupid? That’s William Tell that shot the apple off someone’s head, not Robin Hood? And you expect us to think you know politics?

  2. Jqhn,

    Obviously you didn’t actually read the article. The caricature, which is not mine, is a snapshot statement about the situation at the time and close to the content of the article. The article is about the actions and words and policy of President Obama. If you read more than headlines and images, you would understand that. I don’t write low information content, so I understand how you may be confused as you expected a quick soundbite and minimal content. I would recommend you seek out other less challenging commentary sources. Or you can read the content. Your choice either way.

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