The Republican-controlled House passed a far-reaching tax reform bill that would, among other things, make several changes to 529 college savings plans. House Republicans seek to leverage 529 plans to both promote school choice and hand a symbolic victory to pro-life activists. Both sides of the debate have misjudged how the reforms would play out in the real world.

Allowing families to start saving on behalf of unborn children seems like a minor change. Allowing families to use 529 plans for K-12 education seems much more substantive: it appears to deliver on President Trump’s campaign promise of a major federal investment in school choice.

But this narrative has it exactly backwards. Allowing saving in 529 plans from conception is a substantive change to how these accounts operate, while expanding the accounts to cover K-12 educational expenses is largely a symbolic one.

This may appear to introduce a new federal subsidy for school choice, but it is an empty gesture: families who withdraw their 529 funds early to pay for K-12 education will see a smaller federal tax benefit than those who let the funds accrue until college age.

Read the full article on 529 college savings plans by Preston Cooper at American Enterprise Institute