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GOP: Expand 529 tax-deductible college savings accounts

Just days after bipartisan opposition forced President Obama to drop a proposal to hike taxes on 529 college savings accounts, Rep. Lynn Jenkins, R-Kansas, called on Congress to expand those accounts in the weekly Republican address Saturday.

"These 529 plans were created to help middle-class families save and plan for college ... and ever since Congress allowed folks to withdraw from these accounts tax-free for college expenses, 1 million account holders have turned into 12 million," Jenkins said.

"Unfortunately, instead of expanding 529s, the president recently proposed raising taxes on college savings," she said. "It was a terribly misguided idea, but it took a public outcry for the president to realize it. Just days after proposing this tax on 529s, he agreed to drop it from his budget."

The administration argued that the benefits of 529 plans primarily flow to wealthier families, and the president proposed redirecting some of the tax savings from his proposal into tuition tax credits to make college more affordable for the middle class.

On Tuesday, though, after top congressional leaders in his own party registered their opposition with the president, the proposal was shelved. White House spokesman Eric Schultz said it was becoming a "distraction" from the budget's broader priorities.

On Saturday, Jenkins also touted her own bill to "expand and strengthen" 529 plans.

"We can remove common paperwork problems, empower students to use the money to pay for computers and make it easier for families to send their kids to the college of their choice," she said.

The president first unveiled his proposal in his State of the Union address last week. Though it was abandoned this week, it was not dropped early enough to remove it from the text of the president's new budget proposal, which arrives Monday.

Obama previews his fiscal year 2016 budget

In his own address Saturday, the president previewed his spending blueprint.

"We'll help working families' paychecks go farther by treating things like paid leave and child care like the economic priorities that they are," he said. "We'll offer Americans of every age the chance to upgrade their skills so they can earn higher wages, with plans like making two years of community college free for every responsible student. And we'll keep building the world's most attractive economy for high-wage jobs, with new investments in research, infrastructure, manufacturing and expanded access to faster Internet and new markets."

Noting the falling deficit and signs of accelerating economic growth, the president argued America "can afford to make these investments."

"We just have to be smarter about how we pay for our priorities, and that's what my budget does," he said. "It proposes getting rid of special interest loopholes in our tax code and using those savings to cut taxes for middle-class families and reward businesses that invest in America."

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