Tax Bills Threaten to Impose New Financial Burdens on Students & Academe
November 28, 2017
Please contact your elected officials in Congress now. Tax reform bills in the House and in the Senate have provisions that would impair the accessibility of higher education for the poor and the middle class. Your direct contact with your representatives can make a difference. Please go to usa.gov to look up contact information for your representatives.
Here are a few of the key tax issues as they relate to higher education:
Elimination of the Tax Deduction for Student Loans. The congressional Joint Committee on Taxation indicates that the House tax bill would cost students and families more than $71 billion over the next decade. State treasuries once funded about 70% or more of a public university’s budget. Now, state funds typically comprise less than 30% of a public university’s budget. State universities, in response, had to raise tuitions and fees. Since 1996–97, in constant dollars, adjusting for inflation, the net increase in the cost of a 4-year public education is 61%! (Meanwhile, the advertised sticker price of a 4-year public education has increased by 111.6%.) The House bill kills the tax deduction that is now used by approximately 12 million Americans with student loans. The Senate bill, as it stands now, would preserve the tax break.
New Taxes on Tuition Waivers. America’s success as an innovator relies on thousands of students with research fellowships. Let’s say you have the good fortune to have a tuition waiver at MIT, where you are a research fellow with a stipend of $33,000. Tuition at MIT is around $50,000 a year. If the House version of the bill were to become law, you would be taxed on the value of that waiver as well as your stipend, on an income of $83,000, even though you earn only $33,000. The new tax burden would make your research fellowship financially untenable. This proposed tax change would derail the engines of research across all academic disciplines. This new tax appears in the House bill, but not in the Senate bill.
New Taxes on University Endowments. The President and congressional leaders have wildly misrepresented the role of endowments at our most prestigious colleges. The House bill would tax net earnings of private university endowments by 1.4% This would exacerbate the escalating costs of tuition. Endowments help poor and working-class students attend our best colleges on scholarships. Endowments help underwrite the cost of scholarships, teaching positions, tuition waivers, research, facilities, and the other components that make good institutions great. Taxing endowments is bad for business, which relies on university research. It’s bad for American families, whose students may rely on the tuition waivers or scholarships. It’s bad for the effectiveness, quality, and accessibility of our academic system. Both the House and Senate currently favor this provision.
The two bills of the House and Senate will soon be reconciled in a conference committee of the two branches. Now is the time to contact your elected officials, while congressional leaders are working on changes to unify the two bills.
After World War II, millions of veterans went to college on the GI bill, which paid for their tuition and living expenses. Federal largesse on that scale would be demonized as socialism today, but that big spending by big government helped America produce the most educated workforce and the most prosperous economy the world had ever seen. We need to regain that confidence in higher education as the purveyor of the American Dream.
Over the past fifty years, AWP and its teachers and writers have helped to stage a wonderful experiment in the democratization of the literary arts. As Mark McGurl’s book The Program Era shows, creative writing programs helped many new voices emerge—the voices of Americans not heard from before in our literature. Making America more aware of its own pluralism, this experiment was made largely possible by the affordability of higher education and by public funding for the arts. Our beautiful literary experiment is in jeopardy. At the state level, political animus towards colleges and universities has made higher education more and more expensive, and this puts the America Dream in peril for future generations. Please act now.