State GOP pushes college savings tax cut

Republican lawmakers in Arizona are pushing for a $10 million tax cut they believe will persuade parents to save money for their children’s education as college tuition continues to soar.

If the plan succeeds, individual taxpayers could invest up to $2,500 and couples up to $5,000 every year in a program in which earnings on education funds are tax free and the investment is tax deductible.

The plan is aimed at helping working parents such as Stacey Hemeyer and her husband, Erik. The Mesa couple can pay the bills and put food on the table, but can’t afford to send their three children to college.

“If they went right now, we’d do what we could, but they would largely be on their own,” said Stacey Hemeyer, who is pregnant with her fourth child.

Arizona already has a statesponsored 529 plan where parents and individuals can invest tax free. Arizona has set up a plan with Fidelity Investments, an asset management company, to run the account.

But the GOP proposal adds the benefit of the tax deduction for investing in those programs. The proposal also would allow Arizona families to save using other state-sponsored 529 plans across the country.

“This is money that is being used to invest in our children and better equip our work force,” said Rep. Bob Robson, R-Chandler.

Robson said other plans offer the opportunity for better returns on investments, but this could be among the best ways for working parents to save because of the tax deduction. Typically, parents would look to invest in a more aggressive plan with a higher return if their children were older.

Hemeyer, a 38-year-old photographer, was unsure whether the plan would work for her and her children, but she said she would look into it further.

The tax cut proposal is part of a $63 million tax-cut package being pushed by House Republicans. And it appears to have some bipartisan support. However, Democrats remain cautious because some see it as a way to siphon money away from the state.

But Rep. Pete Rios, D-Dudleyville, said this was one of the more tolerable tax cuts being proposed by the House.

“We know there are going to be some cuts made this year. This is one I can live with because it offers the prize of sending your children to college,” he said.

However, some were worried about a provision that allows parents to put their money in accounts in other states.

“I’m willing to support this as long as Arizona taxpayers don’t lose out,” said Rep. David Schapira, D-Tempe.

Officials with Gov. Janet Napolitano’s office would not comment on the proposal.

If lawmakers approve the proposal, Arizona would join 29 other states and Washington, D.C., in offering such plans.

In order for it to take affect, both houses in the Legislature and the governor would have to agree. Currently, the tax cut proposal is not in the Senate’s budget proposal.