Grassley works to increase access to college and jobs through federal tax code
WASHINGTON – Senator Chuck Grassley said he will offer three amendments to
increase access to higher education when the Finance Committee takes action tomorrow on a
massive bill to try to help stimulate the economy.
“Paying for college is a big concern and a major goal for people across the country,”
Grassley said. “The federal tax code is a proven tool for helping students, parents and other
family members deal with ever growing cost of higher education and, in turn, compete for better
paying jobs. My amendments to the stimulus bill are designed to fine tune opportunities in the
tax code and look out for those seeking higher education wherever the federal government has
The first Grassley amendment would help Americans saving for college protect
investments in tax-exempt savings plans from market downturns by giving plan owners greater
flexibility to switch to more conservative investments if they wish. Known as 529 plans, the
landmark 2001 tax relief sponsored by Grassley, as Chairman of the Finance Committee,
established the tax policy that made these savings vehicles a highly attractive opportunity for
parents, grandparents and other family members to save for kids’ college educations. Grassley
subsequently worked to make 529 plans a permanent part of the federal tax code.
This amendment from Grassley would build on a December decision by the Treasury
Department to allow 529 account holders to change investment options twice a year. It would
allow section 529 plans to give plan owners the opportunity to change investments up to four
times a year. The growth of 529 savings plans is based on market performance and typically that
of mutual funds. The savings plans are administered by states. Iowa’s – College Savings Iowa –
enjoys broad participation.
The second Grassley amendment in this area would make sure states don’t take actions
that would be counter-stimulative as a condition of receiving enhanced Federal Medical
Assistance Percentage funds, which are the federal government’s share of a state’s expenditures
for most Medicaid services, known as FMAP. The amendment says that states taking these
additional federal dollars must agree to not increase tuition at state two- and four-year colleges
and universities during the period of time that the enhanced federal funding is in effect.
The third Grassley amendment for students seeking higher education and the job
opportunities it creates would increase the level of the “American Opportunity Tax Credit”
proposed by Finance Committee Chairman Max Baucus. Grassley said his amendment would
increase the maximum tax credit of $2,500 to $3,250 for single filers with incomes between
$50,000 and $80,000 annually. Grassley said this adjustment would enhance the effectiveness of
the tax credit for middle-income Americans.
Grassley has long worked successfully to increase access to higher education through the
tax code. The 2001 tax relief that he shepherded through Congress also created a federal tax
deduction for tuition and made the tax deductibility of interest on student loans a permanent part
of the tax code. The Iowa senator also has conducted broad-based oversight of the tax laws
governing nonprofits, including college endowments. He has urged colleges and universities to
maximize the use of endowment dollars to make higher education more affordable for students.
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