Policy Matters opposes using college savings plans for private K-12 tuition
Posted February 27, 2018 in Press Releases
The new federal tax law gives wealthy Americans who send their kids to private school a tax cut. Meanwhile, the Trump Administration and congressional Republicans propose cutting funding for public education. Today, as Ohio lawmakers work to align state law with changes to the federal tax code, Policy Matters Ohio testified against expanding the state’s college savings to include tuition at private K-12 schools.
Policy Matters researcher Victoria Jackson submitted testimony to the House Ways and Means Committee opposing the federal tax conformity bill, Senate Bill 22. She said 529 plans already benefit wealthy Ohioans at the expense of funding for higher education. In 2015, Ohio taxpayers with incomes of $200,000 or more accounted for just 3.9 percent of all state tax returns but took 28 percent of deductions through CollegeAdvantage, Ohio’s 529 plan.
“Because most middle- and low-income people can’t save a great deal for college, these plans are primarily used by higher-income people,” Jackson said. “Policymakers should instead expand opportunity for all Ohioans — especially low-income students — by increasing support for the Ohio College Opportunity Grant, the state’s only need-based aid grant.”
Last year, state lawmakers increased the deduction limit for 529 plan contributions from $2,000 to $4,000 per beneficiary, per year. As a result, the state expects to lose about $20.5 million and $21.9 million in fiscal years 2018 and 2019 respectively. Ohio could lose even more revenue if account holders can also deduct contributions for K-12 tuition.
“If Ohio adopts this proposal it will prioritize tax cuts for the wealthy over revenue to support public education, which educates the vast majority of Ohio’s children,” Jackson said.