Georgia families could see larger tax deductions for contributions to their children’s college savings accounts under a Cobb legislator’s bill that remains alive in the General Assembly’s final days.
Members of the Georgia Senate could consider this month a bill from state Rep. Sam Teasley, R-Marietta, that would double the tax write-offs that filers could claim for contributions to a 529 college savings plan, which is an account that benefits students by allowing funds to be withdrawn for qualified college expenses. The earnings of such plans grow free from federal taxes, while states such as Georgia offer a state income tax deduction or tax credit for contributions.
Under current Georgia law, an individual can deduct $2,000, with those married and filing jointly $4,000, for contributing to a Georgia 529 plan. Teasley’s House Bill 664 would increase those amounts to $4,000 and $8,000, respectively.
“Over the last several years, we’ve seen a pretty significant rise in college tuition costs. And so what House Bill 664 aims to do is encourage families to save more of their own money now so they’re not borrowing money later as the costs of college tuition increase,” Teasley said.
He says the increases are needed as the average college tuition in Georgia increased 83 percent from 2007 to 2014 based on figures from the House Budget Office. Teasley also said a 2010 study published by Washington University in St. Louis showed that children whose families saved money in a 529 plan were seven times more likely to attend college than children without an account.
Georgia also has “fallen behind the curve” compared to other states, Teasley said, with the most common tax incentive offered by other states being $5,000 for an individual and $10,000 for couples.
Teasley’s bill passed the House last month by a 111-51 vote, with Cobb’s Republican representatives who cast votes supporting it while every local Democrat save one voting against. The exceptions were Don Parsons, R-north Cobb, who was marked excused, while Erica Thomas, D-Austell, had no vote recorded.
State Rep. David Wilkerson, D-Powder Springs, said his reasons for voting against the bill were twofold, with the biggest being the increased deduction’s potential to reduce funding to public education. One provision of the federal Tax Cuts and Jobs Act approved by Congress last year and signed by President Donald Trump allows 529 plan funds to be put toward private school tuition and expenses, from kindergarten through high school.
The federal change, coupled with an increased deduction, would mean less state revenue that could be put toward public education, Wilkerson said, adding that districts are already not receiving the full amount of state funding under the Quality Basic Education formula.
“You could basically be moving a big chunk of money — getting that deduction — and using that money to pay for K-12 private schools. It’s a backdoor way of moving money out of public schools to private schools,” Wilkerson said. “I think that’s the biggest heartache people are having.”
Wilkerson also pointed to a February 2015 report from Georgia State University’s Fiscal Research Center, which cited statistics showing that 47 percent of families with either a 529 plan or the lesser-used Coverdell Education Savings Account have incomes over $150,000, while only 30 percent of families with a 529 plan or Coverdell account have incomes below $100,000.
“It’s a great way to save for college for wealthier families — it’s just not being used by those who make less than $100,000,” Wilkerson said. “You’re once again going to make a program that’s benefiting the wealthy and make it even more beneficial to the wealthy.”
Teasley counters that the current average size of a 529 plan in Georgia is about $16,000, with 74 percent of account owners at or below that amount and many families saving that over the course of many years. Doubling the tax deduction would incentivize increased contributions, giving donors the ability to see further growth in the accounts in succeeding years. The change would also help some families who may have not been able to donate much in past years “catch up” during what may be better financial times, he said.
The bill was in the Senate Rules committee Thursday. Teasley said he hoped it would pass out of Rules on Monday and move onto the Senate floor for a vote Tuesday or Thursday, the latter being the General Assembly’s last scheduled day of the session.