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The proposal had aroused opposition from Republicans and
Democrats in Congress.
A source familiar with the situation said House of
Representatives Democratic leader Nancy Pelosi had pressed
senior administration officials to drop the proposal as she flew
with Obama on Air Force One from India to Saudi Arabia.
"Given it has become such a distraction, we’re not going to ask
Congress to pass the 529 provision so that they can instead
focus on delivering a larger package of education tax relief
that has bipartisan support," the White House official said.
The official said the plan had been "a very small component of
the president’s overall plan to deliver $50 billion in education
tax cuts for middle-class families."
The "529" plans are sponsored by states and run by investment
management companies. Withdrawals from the accounts can be used
tax-free to pay for qualified education expenses at any college
or university in the country, such as tuition, fees and books.
Supporters of the the move to tax the plans had pointed to a
2012 government report showing they were being used by less than
3 percent of U.S. families and that those families tended to be
much wealthier than those without 529 accounts.
Opponents of the proposal said the plans were popular among
middle-class families and disputed arguments that they benefited
only wealthier Americans.
(Reporting by Jeff Mason and Peter Cooney; Editing by Andrew
Hay)
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