What everyone heard at Obama’s State of the Union was how he wanted to tax the rich and prevent them from leaving their children the spoils of their life. They also were duped into believing that he wants to help the Middle Class and make college FREE. What they did not hear is his desire to wipe out the Middle Class with a tremendous tax burden.
The Middle Class family has been able to save money for their children up to $300,000 under the tax-exempt 529 savings program for education. They are allowed to save $14,000 a year where the profits are tax-free. About 47% of families that had the 529 plan earned more than $150,000 per year in HOUSEHOLD income. Obviously, we are not talking about the “rich” here. So how does Obama get to raise taxes on the Middle Class? First you keep lowering the definition since everyone assumes the “rich” must be someone earning more than they do. Obama also tells them he is raising taxes on the “rich” creating a clever and slick diversion or distraction with a promise it is for the benefit of the Middle Class to give them FREE college for two years.
The tax-code that benefits the “rich” you hear about so much is capital gains – not income but investment income. This is what creates jobs that Obama wants to tax so desperately at the normal rates. The tax legislation passed at the start of 2013 permanently extended the George W. Bush-era tax cuts for most people but also added a top marginal tax rate of 39.6% for those at higher incomes — $400,000 for single filers, $450,000 for married couples filing jointly and $425,000 for heads of household.
Obama’s slick distraction is going after capital gains saying (1) he is raising taxes on the “rich” for the benefit of the Middle Class and (2) he will close the loopholes for the “rich” that allows them to leave wealth to their children. First, anyone who invests money is what he calls the “rich” compared to his definition of “real” Americans who depend 100% on government to rob from everyone else to hand those spoils to them.
What Obama has pulled off is very clever. Promising “FREE” college for everyone is only for 2 years and this is to replace the 529 program so he can now grab what people have saved for their children’s education. Saving for a 4 year educate plus medical or law school will no longer be tax free. Obviously, a 4 year education is for the “rich” to be paid for AFTER taxes.
The “FREE” education is a local community college – not a university of your choice. Already, about 40% of community college students’ tuition is covered by federal and state aid. So he is cleverly taxing savings while attributing this to a benefit to be funded by the “rich” now. It is the other expenses (food, transportation, books, etc.) that are often the insurmountable hurdles that the savings in a 529 helped to pay for not to mention room and board. Additionally, in 2003, only 25% of students attending community college graduated. They have a rather poor track-record for education. Obama is NOT offering FREE college, he is only offering 2 years free so he can grab what people have saved all their years. This is very slick.
Obama will then create a real change in education. Anyone looking to get accepted to a university outside of where he lives will now have to earn every penny AFTER taxes and 4 years+ is now all funded AFTER tax.. This is a slick way to wipe out savings for Middle Class families with HOUSEHOLD income well below $250,000, which will be the vast majority. This is not a tax break, this is a substantial TAX INCREASE on the Middle Class. The definition of the “rich” keeps coming down. It was $5 million and now with his repeal of 529, it is down to HOUSEHOLD income of $150,000. Soon he will include in that HOUSEHOLD income approach everyone living in your house – not just the parents.
