Daniel Katz reviews the many ways in which the tax plan now being debated and being pushed to an early vote without hearings will have deleterious effects on students in higher education and in K-12.
“A great deal of ink has been spilled on how the Republican tax bill working through Congress would impact higher education for the worse. The highest profile item is the plan in the House bill to tax graduate student tuition waivers as income, effectively making the young people who are helping the nation move forward with critical research pay taxes on “incomes” that are tens of thousands of dollars higher than they actually get paid. However, higher education takes multiple hits in the House bill such as taxing endowment earnings that go towards school advancement, reducing incentives for charitable giving, and eliminating student loan interest deductions that benefited 12 million borrowers in 2014.
“For a bill that the G.O.P. is trying to market as a “boon” to the middle class, the House bill does not just tax graduate student tuition waivers, but also it takes aim at tuition benefits for higher education employees and their children. The New York Times portrayed a 64 year old night custodian at Boston College who managed to send all five of his children to college using such a benefit and who would never have been able to do so under the House bill. Assurances from House leaders that their bill would grant most Americans so much tax relief that they would not need those benefits ring hollow as analyses show that various provisions in the bills could result in $1.6 trillion dollars of tax INCREASES on middle class earners over the next decade.
“So while the House and Senate bills are not friendly to higher education (the Senate bill somewhat less so), there has been little talk about the potential impact on K-12 education if the Senate bill passes, is reconciled with the House bill, and sent to the Oval Office for splashy signing ceremony. There are several provisions in both pieces of legislation that would take serious aim at K-12 education at the state and local funding levels. Reporters and editorials have stressed that eliminating the deductions for state and local taxes (SALT) including property taxes, as in the Senate bill, will heavily impact Democratic leaning states with higher tax burdens, but the Governmental Finance Officers Association (GFOA) reports that eliminating SALT deductions from the tax code will have a broadly negative impact on tax payers in all states. According to the GFOA findings:
*30% of tax units use the SALT deduction.
*60% of deductions for earners under $50,000 a year come from property taxes and the loss of the deduction would negatively impact home ownership and price stability.
*30% of earners between $50,000 and $75,000 a year use the SALT deduction. 53% of earners between $75,000 and $100,000 a year use it.
“Income earners at all levels would see their taxes go up if the SALT deduction is eliminated.
More importantly from a public school perspective: the loss of the SALT deduction would apply significant pressure on states and municipalities to reduce taxes in order to offset the increases in federal taxes paid by their constituents. Using the 8th Congressional District in Texas north of Houston as a model, the GFOA estimates that the district would see an increase in federal taxes of $306 million dollars. Offsetting that with state and local tax decreases could impact $125 million in school funding. Simply put: education funding is an enormous local and state expenditure, and it would have to be cut in order to provide any relief to tax payers who lost SALT.”
This, it is wrong to assume that the removal of the SALT deduction would harm only blue states. As Katz shows, it will cut funding to most schools.
Read on to learn the many ways that education funding will be slashed because of this tax bill that fattens the bank accounts of the richest.
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