As Congress reconsiders various tax breaks it voted into existence (home mortgage deductions, etc.), could 529s come in for increased scrutiny and possible elimination? According to a GAO report, the revenue lost due to 529-related tax breaks was an estimated $1.6 billion in fiscal year 2011 alone. In its report, the GAO reiterates its previous recommendation to Congress that it revisit tax expenditures like those from 529 plans from time to time. "We have recommended in the past that tax expenditures be periodically reviewed to determine their effectiveness in achieving specific policy goals, particularly given the nation's long-term fiscal imbalance," the report says.
This recommendation, however, is highly unlikely to get much traction in Congress, experts says. The plans are great PR for state officials who aren't likely to give them up without a fight. Government web sites typically tout their "commitment to education" demonstrated by their continued support of their state's 529 plan (see the web site of West Virginia's Treasurer, John Perdue, for an excellent example.)
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