Stacey Hemeyer and her husband Erik earn enough to pay their bills and put food on the table for their three children. But like a growing number of working parents, there’s not much left for the Mesa couple to sock away in a college savings fund.
“If they had to go now, we’d do what we could, but they’d be largely on their own,” said Stacey Hemeyer, who is pregnant with the couple’s fourth child.
To help people like the Hemeyers, state lawmakers are pushing for an estimated $10 million tax cut they believe will encourage parents to save more money for their kids.
If the plan, sponsored by Republicans, is adopted, individuals could invest up to $2,500 and married couples up to $5,000 a year in a program where education earnings are tax free and the investment is tax deductible. The money remains tax free as long as it’s used for post-secondary education.
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 are older.
Stacey Hemeyer, a 38-yearold photographer, was unsure whether the plan would work for her and her children, but said she would look into it.
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 cautions 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 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.