EconPapers    
Economics at your fingertips  
 

Are Higher 529 College Savings Plan Fees Linked to Greater State Tax Incentives?

Vicki Bogan

No 51127, Working Papers from Cornell University, Department of Applied Economics and Management

Abstract: Despite the fact that 529 College Savings Plans have existed for over a decade, there has been limited scholarly attention on investment questions related to this savings vehicle. In some of the first academic literature on this topic, Alexander and Luna (Supplement 2005) identified a surprising relationship between 529 College Savings Plan participation and plan fees. They found a positive relationship between participation rates and fees. While they link this counterintuitive result to plan marketing efforts by brokers, I propose an alternative view. In my data which covers a five year time span, I find no significant relationship between participation rates and fees. However, when investigating the tax incidence with respect to 529 plans, I find a positive relationship between state tax rates and 529 plan fees. This suggests that investment companies could be opportunistically setting fees to usurp the benefits which state governments intended for investors. Since state tax incentives are designed to induce participation and plan fees (by design) are correlated with these incentives, the positive link between plan fees and participation becomes less of a puzzle.

Keywords: Financial; Economics (search for similar items in EconPapers)
Pages: 24
Date: 2008-04-30
References: Add references at CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/51127/files/WP%20Bogan%202008-10.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:cudawp:51127

DOI: 10.22004/ag.econ.51127

Access Statistics for this paper

More papers in Working Papers from Cornell University, Department of Applied Economics and Management Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().

 
Page updated 2025-03-19
Handle: RePEc:ags:cudawp:51127