College saving deduction will be missed

Editorial by Rocky Mount Telegram, November 28, 2013.

About the only cost that seems to keep anywhere close to pace with rising health care expenses is college tuition. Students, parents and grandparents need all the help they can get in finding ways to send promising young people off to school in pursuit of a four-year degree.

So it’s a shame that a small incentive in that effort will come to an end on Jan. 1. As a result of the sweeping tax reform passed this year by the N.C. General Assembly, income tax deductions for contributions to North Carolina’s 529 college savings plan will be eliminated.

The deduction wasn’t a lot – the maximum allowed was $5,000. But it was of particular value to people with low incomes and middle-class incomes. A recent editorial in The Charlotte Observer estimated that 40 percent to 45 percent of the people who have 529 college savings plans have household incomes of less than $100,000 a year.

For those folks, putting aside a little money as often as possible over the course of 18 years can have a big influence on whether a high school graduate goes onto a four-year school. Eliminating the deduction doesn’t mean those folks won’t continue to save, of course. But the tax break certainly helped. And the estimated amount of money the state will receive as a result of the elimination – $6.1 million – isn’t a lot in a budget of several billion dollars.

We hope parents and grandparents will continue to fund 529 plans anyway. In an economy as challenging as the 21st century’s has been, education is a critical asset for the next generation.