Threats in Federal Tax Reform: Hold Higher Ed Harmless
You may have heard that the new federal tax reform bill affects higher education, but what does it mean for students and institutions? As of last Saturday, both the U.S. House and U.S. Senate had passed their own versions of a proposed tax bill reform. Each has troubling consequences for higher education and the UW.
Implications for Graduate Students
Graduate students are likely to be most affected by the tax bill, particularly if the final version contains the provisions found in the House bill. In the House bill, graduate students will see their graduate student tuition benefits, such as waivers, counted as taxable income. Universities grant tuition waivers in exchange for a student’s teaching and research at an institution on top of their educational pursuits. This is money that students never physically receive, as the tuition is simply waived by the university – however, under this bill, they would be taxed on it. Employer-provided tuition assistance would also be included as taxable income in the House bill.
Other higher education tax benefits to be reduced or cut:
- The American Opportunity Tax Credit: The House bill would eliminate the tax refund on education expenses towards a student’s first four years of college.
- The Lifetime Learning Credit: Included in the House bill is the elimination of this credit that can be claimed on qualified tuition and education expenses during post-secondary education.
- Tuition Deduction: The deduction of $4,000 from taxable income for qualified tuition and education expenses will be eliminated in the House bill.
- Student Loan Interest Deduction (SLID): Deductions from student loan interest repayments on one’s taxable income will be eliminated in the House bill.
More information on these tax credits and other implications can be found here. An outline of the items affecting education across the country between the House and Senate versions of the tax bill can be found in this NPR article.
Taxpayer Charitable Giving
Charitable donations are an important funding source for public universities, particularly as state support has dwindled across the country. Under both the House and Senate versions of the tax bill, standard deductions will increase. As donors may see this as less incentive to give, we anticipate a negative effect on nonprofits such as colleges and universities. Additionally, sports boosters who have benefited from a deduction from the purchase of athletic tickets will no longer receive this benefit. This is eliminated in both the House and Senate versions of the tax reform bill. These funding sources are critical as they alleviate much of the strain public higher education institutions face with limited budgets.
President Cauce Speaks Out
President Cauce outlined her concerns about the tax bills in a November blog post. As a research institution, the taxing of tuition waivers would significantly impact the STEM pipeline the university has work hard to establish, especially during our current tech boom. In the President’s most recent blog post, she highlights that the House bill, in particular, will be the most damaging to students and could stunt the innovation that the UW helps cultivate.
How can you help?
Leaders from both parties have chosen members (“conferees”) to meet (“in conference”) and reconcile a final bill. Provisions from each version of the bill could be included in the final tax act, and the House version, in particular, would have more dire implications for higher education. Now is the time to speak out and let the following Washington lawmakers know that members of the higher education community are paying attention.
For the next few days, we’re doing it on Twitter and Facebook for immediacy. Use the hashtag #ReworktheReform:
Tell these House members to fight within their chamber to hold higher education harmless:
Representative Dan Newhouse: @RepNewhouse
Representative Jaime Herrera Beutler: @herrerabeutler
Representative Cathy McMorris Rodgers: @cathymcmorris
Representative Dave Reichert: @davereichert
Hey @RepNewhouse @herrerabeutler @cathmcmorris @davereichert, the House bill is bad for university students in WA and across the country. Hold higher ed harmless. #ReworktheReform
@RepNewhouse @herrerabeutler @cathmcmorris @davereichert – the higher ed community is watching. Please work with your House members to fix the issues for students in your tax bill. #ReworktheReform
Remind Washington conferees to fight for higher education in the final bill:
Senator Patty Murray: @PattyMurray
Senator Maria Cantwell: @SenatorCantwell
@PattyMurray @SenatorCantwell – Tax bill is bad for higher education. Thank you for fighting in conference for college and university students in Washington and across the country. #ReworktheReform
@PattyMurray @SenatorCantwell – College and university students are counting on you! Help Congress hold higher ed harmless. #ReworktheReform