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Anti-Middle-Class Economics: What Obama’s 529 Grab Revealed


Well, that was quick. After less than two weeks, President Obama has dropped his plan to tax withdrawals from the “529” college savings plans widely used by middle-class parents.

The proposal was never even remotely likely to see the light of day, nor was it worth debating on its merits. It was an outright money grab at the expense of people who are so foolish as to actually save for their children’s education. Considering how the government has done everything possible to drive up the cost of higher education, forcing millions of young people into debt, the idea of then taxing their parents for trying to save for college is simply monstrous.

But there’s something else about this proposal: it was almost insanely suicidal. What politician in his right mind proposes a tax aimed narrowly at the middle class, and at such a universally accepted good as education? Even Nancy Pelosi shot this one down.

Megan McArdle suggests, quite reasonably, that this is a desperate move by those who need to finance ever bigger government and are simply going where the money is: the vast American middle class. You can understand why the champions of big government would be slavering over the very thing that defines the middle class, its savings. As she points out, 529s are not the first target. There have already been trial balloons about raiding 401(k)s and IRAs. The truly committed leftist looks upon our private savings as a vast reserve of capital unfairly withheld from its proper function of servicing the needs of the state.

I think that’s the real explanation. This is not so much a rational calculation about how to finance the behemoth state. This is an admission by a man who has no more election campaigns to run, and therefore no pragmatic constraints, about his real outlook and real preferences. A president who just a few weeks ago hailed the triumph of a supposed “middle-class economics” is revealing his hatred and contempt for the middle class.

I never bought that line about “middle-class economics.” To begin with, there is no such theory, program, or school of thought. It is possible to name what “supply side economics” consists of, and it is even possible to describe “Keynesian economics.” But “middle-class economics” just refers to whatever grab bag of programs Obama championed that he now wants to take credit for. Plus a few things, like domestic oil production, that he actively opposed but still wants to take credit for.

Yet Obama’s actual economic policy has included a lot of priorities that are definitely not aimed at the middle class, such as his fight for the indefinite extension of unemployment benefits. A proposal that subsidizes people for not working is, by definition, not “middle class economics.”

And now, finally, he has shown us what he really thinks of the middle class. The most telling part about the 529 proposal is that it was coupled with a proposal for two free years of community college.

Working to get our kids ready for a four-year college—academically and financially—is what the middle class does. There is perhaps no activity that is more middle-class-ish than that. And you can see why: it’s our way of ensuring that the next generation stays in the middle class. We’re not well-off enough to give them multi-million-dollar inheritances, but we are well-off enough to give them an education that will qualify them for a white-collar job. So this is treated almost as a sacred obligation. But do that, and Obama thinks you should get taxed. On the other hand, if you put aside no money and send your kid for a community college education that will qualify him, at most, for high-end blue-collar work, Obama thinks you should get a subsidy.

Add to that Obama’s less well-publicized proposal to offset his new taxes with more subsidies for non-taxpayers.

In an aim to help the middle class, the White House proposal would then have made permanent the American Opportunity Tax Credit, which provides up to $2,500 per year for families with incomes up to $180,000. It would extend that credit, which is refundable (distributed as a government check) for some families who don’t owe federal income taxes, to new categories of students such as those attending classes part time.

Let’s unpack that terminology: a “refundable” “tax credit.” You know what the right word is to describe a check from the government that pays you back for taxes you never paid in the first place? The right term is “welfare,” or better yet, “handout.”

That shows you president Obama’s priorities. If you work and save to provide for yourself and your children—then he wants to raid your savings with a special new tax. But he’ll “offset” that by increasing handouts for people who don’t work, don’t save—and don’t pay taxes.

What defines the middle class is its self-reliance, its ability to provide for its own needs and set aside savings for the future. History teaches that this also gives the middle class a troublesome independence. Precisely because they don’t need the state or the sovereign to support them, they are resistant to its blandishments. So its no wonder that Obama wants to punish and discourage savings—while focusing all of his efforts on supporting those who rely on handouts from the state.

I have written before about the left’s history, in its big-city fiefdoms, of literally purging the middle class—driving them away to the suburbs or out of state, and leaving only two groups: the wealthy and the poor. See a fascinating animation which captures Chicago’s transformation from a middle-class city to a two-tier class society. As I noted, “It’s almost as if they want there to be a vast rabble of the poor who look upward for political saviors, rather than a thriving independent middle class that just doesn’t need them.”

By attacking the middle class for engaging in the most quintessential middle-class behavior—saving for their kids’ education—President Obama has just confirmed that speculation.

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Obama proposed taxing 529 college savings plans in order to pay for his "free" community college … in The Federalist's Hangs on LockerDome