Our nation faces a crucial dilemma: postsecondary education is increasingly a requisite to meaningful participation in an information economy, but college costs are skyrocketing, placing such education out of financial reach for many. If we do nothing to solve the problem at the front end, we will face a Hobson's choice of importing increasing numbers of college-educated workers from abroad, outsourcing professional jobs, or increasing taxpayer subsidies to college students.
Arizona can avoid that dilemma by making it easier for families to save for their children's college education. The vehicle is a college savings account commonly called a 529 plan, into which parents or others can make after-tax contributions that can be redeemed tax-free, so long as the money is used for postsecondary education. Last year, Congress made permanent the tax-free redemption status of 529 plans. Thirty-two states provide deductions or credits from state income taxes for 529 contributions. Income tax deductions are a low-cost means for states to encourage families to provide for their children's educational future.
Arizona is one of the few states that does not provide deductions for 529 contributions. Given our booming population and the fact that most of Arizona's postsecondary institutions are publicly financed, taxpayers face enormous costs unless the state facilitates family savings for college. By examining and adopting policy innovations from other states, Arizona quickly could step to the front of the parade, setting a national standard for promoting family self-sufficiency in postsecondary education.
Read the full proposal in College Savings Accounts: How Arizona Can Help More Families Afford College Education