529 plan tax benefits go overwhelmingly to white families who can save

Evidence

A decade later, when college costs had grown and the maximum Pell Grants were not keeping pace, two more changes took place. In 1996, 529 plans that provide favorable tax treatment for certain college savings accounts were approved by Congress. Money deposited into the account by parents or other family members is from after-tax dollars, and the investment income is not taxed as the account grows. In addition, any withdrawals for tuition, books, and room and board are treated as tax-free intrafamily gifts. To participate, of course, a family must have extra income to set aside, and as of 2012, only about 3 percent of Americans were saving for college using a tax-preferred account, according to the Government Accountability Office. Of those, 84 percent were white and 5 percent were black. — Dorothy A. Brown, The Whiteness of Wealth, 322

Categorization

• XREF: This is the third of the four specific provisions the reader needs — the saving-based provision whose benefit scales with spare income.