SB1349 would allow 529 college savings plans to be used for K-12 private school tuition. The original goal of 529 savings plans was to incentivize long-term saving for college. However, the 2017 federal tax changes now allow for federal tax-free withdrawals from these savings accounts to pay for tuition at K-12 religious and other private schools. SB1349 would amend Arizona law to also allow for state tax free withdrawals to pay for K-12 private school tuition. With Arizona’s public schools still receiving less funding today than a decade ago, there is no reason for layering a state income tax break on top of a federal income tax break for private school education. Nothing in the bill prevents families already planning to send a child to private K-12 school from depositing money in a 529 plan one day to qualify for the tax break and withdrawing the very next day to pay tuition at a private school. The Joint Legislative Budget Committee issued a report showing that this tax break will reduce the state General Fund revenues each year, revenues which could otherwise be invested in other priorities. There are good reasons for lawmakers to oppose SB1349.
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