House Passes GOP Tax Plan

Plan targets large endowments of private colleges and eliminates many deductions benefiting student loan borrowers and graduate students.

November 17, 2017
 

House Republicans on Thursday pushed through tax reform legislation widely opposed by higher education leaders who say many of its provisions will make a college degree less attainable and hurt the financial strength of institutions.

The bill passed by a 227 to 205 vote with 13 Republicans voting against the plan; it did not receive support from any Democrats.

The House plan, which was introduced just two weeks ago and did not receive a single hearing, dramatically lowers corporate tax rates and shrinks the number of income tax brackets. It has come in for criticism from higher ed both for the offsetting revenue it seeks from institutions and the elimination of benefits for students.

Representative Kevin Brady, the Republican chair of the House Ways and Means Committee and the chief architect of the plan, said in a closing statement before the vote Thursday that the legislation would improve the lives of Americans across the country.

"For too long, this broken tax code has put the needs of the people second -- propping up Washington special interests at the expense of hardworking Americans," he said.

But critics of the bill said hardworking students would suffer as a result of many of its provisions. In a letter to Republican and Democratic leaders in the House ahead of the vote this week, Ted Mitchell, president of the American Council on Education, said those provisions would "discourage participation in postsecondary education, make college more expensive for those who do enroll and undermine the financial stability of public and private, two-year and four-year colleges and universities."

"This is not in America's national interest," Mitchell wrote.

Among the most heavily panned provisions of the plan that directly affect students is the repeal of a tax code provision allowing colleges and universities to waive the cost of tuition for graduate students. That change would effectively impose a new tax on graduate students themselves, a move that student groups have warned would make graduate education unattainable for low- and middle-income students in a range of disciplines.

Sam Leitermann, president of the National Association of Graduate-Professional Students, said the group was disappointed the House had passed a bill that does not protect graduate student tuition waivers.

“The taxation of tuition waivers will be devastating to graduate studies across the country and will cause many graduate students to be unable to continue their studies,” he said. “We will continue to advocate against these provisions through the reconciliation process.”

Families of college employees would also be hit by the House plan. It would tax the value of tuition discounts currently offered by colleges and universities to the spouses and children of their employees.

The repeal of the tax code provision that allows those benefits for graduate students and family members of employees is estimated to create $5.4 billion in revenues over a decade, according to an analysis the Joint Committee on Taxation presented to Senator Patty Murray, a Washington Democrat and the ranking member on the Senate education committee. The analysis found that student-related provisions of the bill would generate $71.5 billion in revenue.

Another provision of the bill would apply a 1.4 percent excise tax to private college endowments valued at $250,000 per full-time student. That provision would affect fewer than 100 higher ed institutions, but opponents say it penalizes colleges for having a stable revenue stream. It also doesn't redirect that money to student aid -- even though a chief complaint of endowment critics on Capitol Hill is that spending from those funds doesn't do enough to lower the cost of college.

The plan also eliminates tax-exempt private activity bonds that private -- and some public -- institutions use to lower the cost of borrowing for new construction. Effectively this would make it more expensive for colleges to build or renovate facilities. Because wealthier colleges can frequently raise money to build without borrowing, the impact of this provision would be greatest on institutions of modest means.

Higher ed groups also warn that the elimination of state and local tax deductions in the House plan would have negative long-term implications for public funding of colleges and universities. Without those deductions, states may see more opposition to raising taxes -- or even pressure to lower taxes -- that could lead to less support of public universities, critics say.

Reid Setzer, government affairs director at the progressive advocacy group Young Invincibles, said it is “appalling” that congressional Republicans think a solution to increasing student debt is cutting investments in higher education to pay for tax cuts for wealthy corporations.

“The Senate has and should continue to reject the House’s higher education cuts. But the Senate tax plan is also flawed: it fails to boost support for students and families who are struggling to pay for college, and uproots our health-care system by increasing premiums and driving up the number of uninsured,” he said. “Congress should keep their promise to help families get ahead. This plan misses the mark.”

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