Tag: 529 Plans

529 Ways to Harm School Choice

December 2, 2017 11:14 am December 2, 2017

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The Weekend is usually reserved for less-topical discussions about American public education and American society in general. But this morning’s move by the U.S. Senate to pass a tax cut…

The Weekend is usually reserved for less-topical discussions about American public education and American society in general. But this morning’s move by the U.S. Senate to pass a tax cut plan brings up one of the least-sensible approaches to expanding school choice touted by the most-hardcore of advocates: Expanding the use of 529 higher education savings plans for financing private school tuition.

Dropout Nation already discussed the House Republican version of the plan, which managed to gain approval as part of the lower house’s tax cut proposal. But Senate Republicans had managed to avoid offering a similar plan. But last night, just hours after Senate Republicans hastily crafted its tax plan without a single hearing or deliberation (and often with illegibly handwritten notes redlining what little was in print), Texas Sen. Ted Cruz successfully amended the bill to include a proposed 529 expansion that is little different from the House proposal.

As you would expect, hardcore school choice activists are pleased as punch with the move. Invest in Education Foundation, whose vice president wrote an op-ed in The Hill earlier this week calling for the Senate to enact the proposal, tweeted the news proudly. Expect more to come from Heritage Foundation’s Lindsey Burke, who has been the lead player in getting Congressional Republicans to put the idea into law.

Certainly the expansion of 529s may superficially expand opportunities for children to attain high-quality education. But the key word is “superficially”. As your editor explained last month, the effort does little for families regardless of income or background.

For poor families, especially those from Black and Latino backgrounds, the 529 expansion is of no benefit to them because they don’t earn enough income to either open up and maintain a 529 account. This is especially problematic when you consider that neither Congressional Republicans nor the Trump Administration offered up an Earned Income Tax Credit-style program that would help these families gain money that they could then put into 529 plans to pay for private school tuition payments and tutoring (as well as even save for college).

Because of the nature of 529 plans, as well as the lack of a education tax credit, the Senate and House proposals raise concerns school choice advocates such as Howard Fuller have had about Education Savings Accounts: That poor families lose out at the expense of families that already have resources and can take advantage of various vehicles that allow them to save and reduce tax burdens all at once.

Yet the 529 expansion plans also don’t help middle class and affluent families. This is because the more money siphoned off from contributions to elementary and secondary education expenses, the less money will go towards college savings. Even if a family contributed the full maximum of $14,000 a year (which is almost never done), the nation’s average private school tuition of $7,700 (which is often higher in states such as California, Maryland, and New York), results in families forfeiting both the immediate contributions as well as the future investment gains and interest compounding in the process. Given the high costs of higher education, this means more middle class families lose out on the ability to help their children gain the postsecondary knowledge they need for success in adulthood.

What makes the House and Senate plans especially bad policy is tat they could have easily expanded school choice for all families by using another existing vehicle: Flexible Spending Accounts. Those are already used by families to pay for preschool and child care expenses as well as medical costs, and could have been expanded for use in financing private-school tuition and other K-12 expenditures. That move would have been even better for families who already use those plans, as well as for poor and minority households, because those are funded through paycheck withholding and would be supported by the 20 percent federal child care tax credit already in place. But this wasn’t considered.

Put simply: The 529 expansion plans are bad policy. Contrary to what hardcore choice activists want to argue, the proposals will do nothing to help the most-vulnerable children gain opportunities for high quality education. More importantly, as I noted last month, the lack of a companion plan to expand choice for poor and minority children and their families (and the uselessness of the proposal for families who are merely middle class or affluent) means that 529 expansion is merely a tax subsidy for the wealthiest families who can already pay for private school tuition out of their own pockets (and would stick to using 529 plans for paying for college savings).

When you consider that the 529 proposals are part of tax cut proposals that eliminate the Individual Mandate, a key tool for helping poor families gain healthcare coverage they need to keep their children healthy, and September’s elimination of the Children’s Health Insurance Program (which covers 8.9 million children from low-income households), it becomes even clearer that the 529 expansion plans are callous acts of policymaking by men and women who care nothing about helping all children survive and thrive from conception to adulthood.

Meanwhile any discussion about the 529 expansion proposal cannot be divorced from the Trump Administration’s White Supremacist war against Black, Latino, and immigrant children from Latin America, Africa, and Asia. This is because the administration’s failure to push for an education tax credit that would benefit those children is another example of how it has no great interest in helping anyone who isn’t White or the descendant of European immigrants. The fact that there are so-called reformers working for the administration in the U.S. Department of Education — and that Betsy DeVos is Secretary of Education — means nothing. Because they, too, are part of the administration’s concerted disdain towards poor and minority communities.

Meanwhile the 529 expansion proposals will do damage to efforts by reformers to expand choice, especially vouchers and charter that have proven to help poor and minority children escape failure mills. Progressive and centrist Democrat reformers who have just begun warming up to the idea of moving beyond charters as a vehicle for school choice, now find themselves on the defensive as ideological fellow-travelers, angered by this tax subsidy for wealthy families, will oppose nearly every form of choice. Congressional Republicans basically weaponized a key approach to transforming American public education, playing into the hands of traditionalists such as the National Education Association, the American Federation of Teachers, and suburban districts, the most-fervent opponents of helping poor kids escape failing schools.

There is no way anyone who calls his or herself a champion for all children and a school reformer can be pleased with the passage of this proposal. Not one way. At all.

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The Weekend

On 529s and the Intent of Movements

November 4, 2017 9:35 am November 4, 2017

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The other problem with 529s for school choice: Yesterday, Dropout Nation explained why the plan by Congressional Republicans and the Trump Administration to transform 529 higher education savings vehicles to expand…

The other problem with 529s for school choice: Yesterday, Dropout Nation
explained why the plan by Congressional Republicans and the Trump Administration to transform 529 higher education savings vehicles to expand school choice does little for poor and minority communities who lack the incomes and wealth to use them. But the more your editor and others think through the plan itself, the more it becomes clear that it will even harm middle-class families as well as damage efforts to ensure that all children attain higher education they need for success in adulthood.

How is that possible? Start with how 529s currently work — and how the Congressional Republican proposal would pervert it.

When a family contributes to a 529 plan, they are looking to grow the dollars they put in so that at least a portion of higher ed tuition costs are covered. This is done over time by investing contributions of up to $14,000 a year (or $70,000 in one year to cover a five-year period) into mutual funds as well as money market accounts similar to certificates of deposit issued by banks. Over time, those initial dollars (as well as additional contributions over time) should grow thanks to investment growth and interest compounding.

But this isn’t possible if families start tapping 529 accounts to pay for private school tuition costs or even tutoring expenses. Why? Because the more money siphoned off from contributions to elementary and secondary education expenses, the less money will go towards college savings.

Say a family contributes to the full maximum of $14,000 a year. [Most never do.] They may be able to avoid cutting into long-term college savings if they limit K-12 expenses to around $4,000 a year. But the average private school tuition in the United States is $7,700, according to the U.S. Department of Education — and in many places such as Maryland, private-school tuition is even higher. Put simply, the more money spent out of the 529 on private school and tutoring costs, the less money will be saved for college. They also lose out on future investment gains and interest compounding in the process.

Some of these issues would have been avoided if Congressional Republicans chose instead to expand the use of Flexible Spending Accounts — which are used to pay for preschool and child care expenses as well as medical costs — for use to fund private-school tuition and other K-12 expenditures. That move would have been even better for families who already use those plans because those are funded through paycheck withholding and would be supported by the 20 percent federal child care tax credit already in place. But this wasn’t likely proposed.

One reason lies with Heritage Foundation and its education czar, Lindsey Burke, who have been the prime proponents of the 529 expansion. The other lies with the overall intent of Congressional Republicans to pay for the $1.5 trillion tax cut. The proposals in House Resolution 1, along with the 529 transformation, likely have the affect of decimating American higher education. If successful, those moves will damage the futures of children regardless of background to gain knowledge they need for lifelong success.

This effort against higher education includes the proposed elimination of the lifelong learning credit of $2,000 (which is used to by nontraditional collegians to offset the cost of tuition), the $5,250-per-person deduction given to companies that offer higher ed tuition assistance programs to their employees, and changes that would only reduce the percentage of taxpayers who can reduce their tax burdens by itemizing donations to universities and nonprofits from 30 percent to five percent.

Viewed against those other moves, the expansion of the use of 529s for use on K-12 costs would damage higher education by making it even harder for families to save for the tuition costs. Which means that this is an even worse plan for children than even I realized. When you add in all of the other proposed changes to the tax code that also harm families — including the elimination of deductions for medical savings accounts and adoption expenses — the Congressional Republicans and the Trump Administration can be accused of waging war on the efforts of middle-class and even poor families to help their children survive and succeed.

Intent Makes a Movement: One of the most-interesting questions this week was incidentally raised by Columbia University scholar and New Yorker writer Jelani Cobb in his response to an essay by University of Virginia Professor Fred Schauer on whether the White Supremacist protest that led to mayhem and carnage (including the murder of Heather Heyer) last August should lead cities to find ways to restrict the free speech and assembly rights of protestors. That question? How do you distinguish between movements and mobs.

In his piece, Cobb attempts to argue that the difference between a movement and a mob lies with whether the goals are primal or not. From where he sits, the Unite the Right protestors were the latter because their goals are driven by racial bigotry, which makes them primal (based on tribalism that is hard-set in all of us). On that front, I would argue that he is incorrect. This is because what distinguishes movements from mobs isn’t their goals, but their organization and their intent.

All movements are primal in some way. Movements to end colonialism and oppression, such as Mahatma Gandhi’s effort to end British colonialism of India, are driven by the urge to be free. Those that oppress, such as the Nazis and other 20th-century Fascists (as well as the American White Supremacists off which they partly modeled themselves) appeal to authoritarian instincts.

Even the modern school reform movement, is driven in part by primal urges. In this case, the desire for learning as well as to protect the most-vulnerable, the latter being derivative of the maternal and paternal instincts most parents have for their children. Traditionalists, in turn, are also driven in part by the urge to protect the influence and power they have gained over time.

To dismiss the desire to act on primal instinct as either base or merely a province of mobs is to ignore the noble and ignoble feelings that drive both positive and negative social movements.

What differs a movement from a mob is organization and effort. They are intentional. Which is why what happened in Charlottesville (as well as the White Supremacist rally that happened last month in Shelbyville, Tenn.) are so troubling.

As Vice and other outlets have reported , the new-era White Supremacists behind Charlottesville spent months planning their protests before they finally descended on the Virginia college town. This included discussions on the Daily Stormer and other forums about logistics, messages, even what weapons to bring to the event. Given that they prepared for violence, White Supremacists such as Jason Kessler and Chris Cantwell expected Heyer’s murder, as well as the anticipated that their allies would brutally assault counter-protestors such as DeAndre Harris.

The Unite the Right players, in turn, are part of a larger White Supremacist movement that extends far beyond their numbers that day in Charlottesville. As Buzzfeed noted last month an investigative piece, those ideological and political ties extend to Breitbart, the media outlet controlled by Robert Mercer and Steve Bannon, both of which have played key roles in sustaining the presidential campaign of the current Occupant of the White House and his administration. It also extends to President Donald Trump himself, who put White Supremacists such as Bannon on his White House staff, as well as gave comfort to the Unite the Right crowd after the carnage and mayhem by claiming that that they were “good people”.

Trump and the White Supremacist protestors, in turn, share the same intent: Official state discrimination against Black, Latino, Asian and immigrant men, women, and children. The latter advances this intent through protests, violence, media campaigns, and their own interactions with people Black and Brown. The former and his administration do so through policy, legislation, and executive branch action, all of which has been documented by this publication. In fact, the Trump Administration is merely doing under the business of the White Supremacists that support it.

Mobs don’t have tax-exempt statuses and corporate filings. Movements do.

Put simply, the new-era White Supremacists end up in Charlottesville and Shelbyville are as intentional as any positive social movement. Nothing they do is accidental or incidental; they intend on relegating poor and minority communities . They may be the opposite of the Black Lives Matter and school reform movements of today. But the new-age White Supremacists are still a movement, one that resembles the Klu Klux Klan during its golden age of 1920s (when it counted at least two million members — ncluding eventual U.S. Supreme Court Justice Hugo Black– and actually controlled Indiana’s state government) and the collection of White Citizens Councils, Klan groups, and Southern politicians who opposed the Civil Rights Movement in the 1950s and 1960s.

So all of us opposed to them, especially those within the school reform movement, must deal seriously with their intent and their organization. We must address the immorality of their beliefs and the anti-intellectualism of their ideas and proposals. Simply dismissing them as a mob, especially for the illiberal (and unacceptable) purpose of stamping out their liberty, will never work.

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Three Thoughts

529 Vain Hopes to Expand School Choice

November 3, 2017 12:01 am November 3, 2017

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Dropout Nation normally doesn’t publish on Fridays. But yesterday’s unveiling by Congressional Republicans of $1 trillion tax-cutting proposal includes a plan to expand school choice through existing education savings plan…

Dropout Nation normally doesn’t publish on Fridays. But yesterday’s unveiling by Congressional Republicans of $1 trillion tax-cutting proposal includes a plan to expand school choice through existing education savings plan currently used to fund higher education tuition payments. The actual mechanics — as well as a failure to provide a similar tax credit plan to low-income families — is another reminder that the Trump Administration has no good intentions for poor and minority children. It is also proves that hopes among conservative reformers for a major expansion of choice weren’t worth the compromises they made to their morality and commitment to help all children.

At the heart of the Congressional Republican plan, contained in House Resolution 1 (or the “Tax Cuts and Jobs Act”), is a move to allow families to use 529 college savings plans offered by states and some financial firms to pay as much as $10,000 a year in elementary and secondary school expenses. This can range from private school and apprenticeship tuition to expenses for tutoring services families use to help their children succeed in school. If implemented, the idea, floated earlier this year by the Heritage Foundation, would transform 529s from mere college tuition savings programs (and tools for grandparents to siphon off their wealth before going into the hereafter) to vehicles similar to education tax credits already in place in states such as Nevada.

For middle class and wealthier families who haven’t used 529s so far, not only would the conversion of the plans help them pay for private school tuitions and other expenses, it also comes with a tax benefit to boot. Nearly every state allows contributors to 529 plans to exercise a tax deduction, meaning more tax dollars back into their pockets. Which, by the way, is something they will need since Congressional Republicans plan on reducing the level of deductions they can take on state and local taxes in order to finance the tax cuts they plan under the bill.

Save for worries about 529 plans straying from the original purpose of saving for those increasingly expensive college bills (and the risk of reducing incentives to seek out college education), your editor has no great problem with this proposal on its face. After all, middle class families in suburbia (especially those from Black and Latino households) have long been denied the charter schools and other choice options that are far more robust in urban communities. If this plan was tied together with an Earned Income Tax Credit-style program that helps poor and minority households gain money they can use for private school tuition payments and tutoring (which they can then use to make direct payments or start 529 accounts for their children), as well as keeping current deductions on state and local taxes (which help fund traditional districts), the proposed 529 conversion would be a win-win for all families and children.

Yet this is not the case. Neither Congressional Republicans nor the Trump Administration pushed for an education tax credit program. Which means poor and minority households end up losing out on additional opportunities to help their children gain opportunities for high-quality education and ultimately, the knowledge they need to become part of the middle class.

The lack of such a plan raises the same concerns school choice advocates such as Howard Fuller have had about ESAs that poor families lose out at the expense of families that already have resources and can take advantage of various vehicles that allow them to save and reduce tax burdens all at once. This is especially problematic when you consider that 51 percent of all K-12 students (especially those from Black, Latino American Indian, Alaska Native, and Native Hawaiian households) are on free- and reduced-lunch programs, a proxy for being low-income. The American Federation for Children (whose board current Secretary of Education Betsy DeVos once chaired) has already expressed disappointment that nothing was done to help the poorest families gain choice.

Your editor isn’t exactly shocked. As Dropout Nation readers can recall, I noted back in July that efforts to use the tax code to expand school choice were running afoul of Congressional tax writers, whose concerns had more to do with reducing tax bills for higher-income Americans and corporations than with expanding choice. [Staffers at the U.S. Department of the Treasury also disdained those plans because of the potential impact on the nation’s finances.]

That the Trump Administration is a basket case of a regime with few appointments filled at the U.S. Department of Education and incapable of convincing senators to pass various versions of an ObamaCare repeal all but guaranteed that a school choice expansion would be lackluster. Add in the reality that Congressional and Senate Republicans are also terrible in crafting legislation, and the likelihood of a comprehensive choice program was remote to impossible.

But the problem wasn’t just with the Trump regime’s inability to organize and craft policy (or that of Congressional Republicans). The administration has demonstrated since January that it has no interest in doing well by poor and minority children.

Even the one bone it tossed — a $250 million increase in funding for the federal Charter School Fund and the devotion of $1 billion in Title I funds for intra-district choice for low-income children — was funded in part by eliminating $2.2 billion in funding for Americorps, the program that helps districts provide poor and minority children with Teach for America recruits proven to improve their academic achievement. Given Teach For America’s political muscle as well as that of traditional districts, and those reductions were never going to happen. The effort, put simply, was anything but serious policymaking for advancing systemic reform.

Meanwhile the Trump Administration has done all it can to render miserable the lives of Black, Latino, Native, and immigrant children. From ending Obama Administration-era efforts to stem overuse of harsh school discipline against minority children, to September’s move to end Deferred Action for Childhood Arrivals (which ensured that 760,000 undocumented immigrant children, youth and adults brought to the country as children aren’t deported), to last week’s move to detain 10-year-old Rosa Maria Hernandez as she was heading to a Laredo, Texas, hospital for emergency surgery, the Trump regime has proven uninterested in doing right by our most-vulnerable children.

Conservative reformers, including hardcore school choice activists, will argue that at least there may be an expansion of options through converting 529 plans. But that may not happen. This is because the tax plan itself is now opposed by a variety of interests, including homebuilders and real estate agents opposed to the proposed limitation of the mortgage deduction to homes worth less than $500,000, states and districts upset over the limits on state and local tax deductions, deficit hawks worried that the plan will increase the federal deficit, healthcare advocates concerned that the plan will be a stealth attempt at repealing ObamaCare, and advocates for abortion opposed to the 529 proposal’s plan to allow for families to save for the unborn. So it is unlikely to pass. Which means that this plan to expand choice may not happen after all.

Since DeVos’ nomination last November, all but a few conservative reformers have been silent about both the Trump Administration’s bigotry (as well as DeVos’ own lack of fitness for the job), while others have actively defended it. All in the hopes that their policy proposals would become reality. But it increasingly appears that for the most part, those hopes have been dashed.

These folks will have to look themselves in the mirror and ask if any of this was worth sacrificing their mission to help all children, no matter who they are or where they live, succeed in school and in life. The answers should trouble them their sleep and their waking hours.

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