Iowa State Treasurer Fitzgerald relieved with 529 plan reversal

DES MOINES - State Treasurer Michael Fitzgerald, one of President Barack Obama's earliest backers and top allies in Iowa, breathed a sigh of relief this week when the president dropped a controversial proposal to effectively end the popular college savings accounts known as 529s.

Fitzgerald, a champion of Iowa tax-exempt 529 college savings program, said he was caught by surprise when the president announced plans to take away the tax advantage of the 529 contributions.

Fitzgerald was equally elated with the White House decision earlier this week to scrap the idea.

'I was very happy he changed his mind because so many Iowans benefit from it,” the state treasurer said in an interview. 'We have 225,000 accounts in the Iowa plan, or $4 billion. Iowans love it.”

Under the Iowa program, parents or grandparents can contribute anywhere from $25 to nearly $3,200 annually to a college savings plan that is tax exempt, Fitzgerald noted.

'That's helping a low of lower-income and middle-class people,” he said. 'It's professionally invested and people can go anywhere they want to to school. That's why Iowans love it. It works.

'So I'm really glad the president recognized that not just in Iowa but across the county people love this thing.”

White House economists had argued for more tax fairness by taking away the 529 tax advantage and divert the savings into other tuition tax credits that better benefitted middle-class Americans. But resistance quickly emerged against gutting the 529 accounts, which Fitzgerald - who previously served as the president of College Savings Program Network - said was a bad idea.

'It was a clear demonstration to the president and to the Republicans in Congress that people love this thing. You threaten to do away with it and, boy, there was a popular uprising. I think it sent a clear message,” he said.