WASHINGTON -- The House Ways and Means Committee voted Thursday to expand college savings tax incentives that President Barack Obama proposed limiting earlier this year.
The bill would let people use so-called 529 accounts to buy computers as well as tuition, books and other expenses. It also would make it easier for people to put refunds from colleges back into tax-advantaged accounts without penalty.
"These are great tools that families use to save for college," said Ways and Means Chairman Paul Ryan, R-Wis. "They reward people for investing in our kids' future."
The committee backed the bill on a voice vote after Republicans rejected an amendment that would have limited 529 plans for people earning more than $3 million a year.
The 529 plans, named for the section of the U.S. tax code that allows them, have become increasingly popular since they were expanded in 2001. Contributions are made with post-tax money and withdrawals for most college expenses aren't subject to income taxes.
The measure passed by the committee, which would reduce government revenue by $51 million over a decade, is scheduled for a vote by the full House later this month.
Democrats offered an amendment to prevent people from contributing to 529 accounts if they had adjusted gross incomes of more than $3 million in the prior year. That would have offset the cost of the bill and affected slightly more than 0.1 percent of households.
"Just because someone has means does not mean they're saving for their own child," said Rep. Lynn Jenkins, R-Kan. "They may be saving for a child who is very much in need."
As part of a broader revamp of education tax incentives, Obama earlier this year proposed taxing earnings in the accounts when withdrawn. That rule would have applied only to new contributions.
Administration officials sought to justify that proposal by saying the benefits of 529 plans are skewed to high-income families who have enough money to be able to save. A 2012 study by the Government Accountability Office showed that the median income of families with 529s or similar plans was $142,400, compared with $45,100 for other families.
Obama, who has put $240,000 into 529 plans for his daughters, abandoned his plan to limit them within 10 days of proposing it after facing opposition from both parties.
The Ways and Means Committee on Thursday also advanced measures to make a series of expired tax breaks permanent, despite White House veto threats over adding more than $300 billion to the budget deficit over the next decade.
Those breaks include a $14.3 billion package to encourage charitable giving and others that make it easier for businesses to invest new equipment or research and development.
One provision of the charitable-giving package offers tax breaks to people who make such contributions from individual retirement accounts. Another provides tax breaks for donating property for conservation, and a third expands tax breaks to businesses that donate food inventory.
All three provisions are part of a package of temporary tax breaks that expired at the start of the year. The House bill would make them permanent.
The full House passed the bill later by a vote of 279 to 137, a margin that would overcome a presidential veto. The four representatives from Arkansas -- all Republicans -- voted in favor of the bill.
The committee also passed two other bills on party-line votes, with Republicans in favor and Democrats opposed.
One would make permanent a business tax credit for research and development. The other would make permanent a federal tax deduction for state and local sales taxes. This bill helps people in states without state income taxes.
Both tax breaks have been extended many times, though they were allowed to expire at the start of the year. Making the research tax credit permanent would add $182 billion to the budget deficit over the next decade. Making the sales-tax deduction permanent would add $42 billion to the deficit.
In its veto message, the White House said House Republicans are imposing "a double standard by adding to the deficit" with tax breaks benefiting higher-income people, "after insisting on offsetting the cost of measures that help middle-class and working Americans, such as the extension of emergency unemployment benefits."
Republicans countered that lawmakers from both political parties have repeatedly voted to extend many of these tax breaks on a temporary basis in the past.
Information for this article was contributed by Richard Rubin of Bloomberg News and by Stephen Ohlemacher of The Associated Press.
A Section on 02/13/2015