On December 2, late on a Saturday night, due to its stubborn partisanship, the Senate was struggling to pass the newest version of their five-hundred-thirty-page tax reform bill, as not a single Democrat voted for its passage. Later, the bill would narrowly pass, but only after Vice President Mike Pence was called in after midnight to break the tie on the vote. As a result, the final count was fifty-one to forty-nine. Soon after, President Trump tweeted this:
Indeed, the measure dramatically slashed certain tax rates, such as the corporate tax rate, which dropped from 35 percent to 20 percent—a historic drop—but not everyone benefited. Unfortunately, the proposal disproportionately favors the wealthy and puts college students on the chopping block.
As a result, many students across the country fear that these cuts will make their education unaffordable. Not surprisingly, students outraged by the tax bill protested on Capitol Hill and across the country. So, regardless of whether your parents are paying your tuition or you’re a full-ride athlete, the new measure promises to affect every student in college.
Here are six things every student should know about the new tax bill.
Graduate Students Will Pay Taxes on Tuition Waivers
Tuition waivers are one of the breaks students are given to afford higher education. Graduate students receive a tuition waiver when teaching or being a research assistant while pursuing advanced degrees. As of now that income is not taxed, but under the House’s plan it will be, though the Senate plan does not include plans to strip the benefit.
Not only is the waiver program financially beneficial, it encourages hands-on learning, career building and incentivizes fresh minds to make advances, such as new research, in their field. Michael McRobie, the president of Indiana University, told the Washington Post, “We simply cannot afford to lose ground in attracting those students who we know will drive innovation, guide the development of new technologies, and perform the type of path-breaking research that will improve our economy and quality of life.”
Tax Credits Combined
In its attempts to save taxpayer money, the GOP is also planning to eliminate two important educational credits, the Lifetime Learning Credit and Hope Scholarship Credit. The Lifetime Learning Credit offsets 20 percent of the first $10,000 of qualified education expenses and can be used for as many years as needed, but comes with an income cap. The Hope Scholarship Credit allows taxpayers a credit of up to $2,500 (per student, per year) if they paid for their tuition using a qualified plan.
Both of these benefits would be eliminated, but in exchange, the GOP would extend the amount of time a student can use the American Opportunity Tax Credit (AOTC). Currently, for the first four years, a student can gain annual credit of $2,500 per eligible semester under AOTC. The new tax plan would extend the opportunity to claim that credit by a year, from four years to five, but of course there is a catch: The tax cut would be cut in half the fifth year, meaning the credit would shrink to $1,250.
Repeal Interest Deduction on Student Loans
Currently, eligible students can claim $2,500 of what is paid toward their student loan interest.
These reductions also lower students’ taxable income, which will reduce tax liability, i.e. the taxation that a business or an individual incurs based on current tax laws. According to an analysis from the American Enterprise Institute, the maximum benefit of the plan is $625, while the average benefit is $202. Unlike the Senate’s version of the legislature, the House bill is proposing to repeal the interest deduction completely, despite the fact that twelve million students used the credit in 2015. Even if it is repealed, students may still qualify for state exemptions.
State and Local Tax Deductions
Both House and Senate are trying to lower tax payer deductibles to cap at $10,000 for state and local property taxes. This cap will put a strain on state budgets and lead to less taxes that support community colleges, public universities and the ability to build new buildings for college campuses.
Reduce Incentives for Charitable Giving
Both house and Senate want to increase the standard deduction (an amount reduced on the amount of income taxed) for tax payers. The original standard deduction for joint filers is $12,700 to $24,00 and for individuals is $6,350-$12,000. The house wants to increase it to $24,400 for joint couples and $12,200 for individuals. By increasing standard deduction results in less incentive for charitable groups to donate. College advocates say this will lead to less scholarship money and less money for research tools.
A Proposal That Only Benefits ONE Wealthy College that Has Ties to Betsy Devos
If you weren’t already pissed off, this proposal is the angry little cherry on top. A 1.4 percent excise tax will be put on the largest endowments held by private colleges. Sen. Pat Toomey attempted to exempt certain schools from the excise tax on endowment income based on enrollment and size of the endowment. Only one school qualifies for the exemption, Hillsdale College, which is popular amongst conservatives, educates some of the wealthiest students and has ties to long time donor Betsy Devos, whose brother graduated from Hillsdale. Senate Minority Leader Charles E. Schumer said, “A single wealthy college, the pet project of billionaire campaign contributors to the Republican Party, was exempted from a tax by a senator who fought to get rid of earmark.” Schumer later called this proposal a “metaphor for the whole bill.” Thankfully, Democrats shut that Hillsdale exemption shit down. However, the 1.4 percent excise tax on large endowments for private colleges is still a proposal which gives incentive for students to go to private schools.
Politicians made the assumption that college students are too occupied taking selfies and binging on Netflix to notice how this tax bill derails many student benefits. It was a fair assumption because who the hell wants to understand a tax bill? Lawmakers rushed to get it over with themselves. After a year of Trump’s presidency college student’s have proven that we aren’t just a bunch of ignorant teeny boppers. We clearly understand the senate’s bill proposal is in college student’s favor while the house seeks to minimize financial opportunity for college students. The bill still needs to be approved by both the House and Senate, and signed by President Trump, who has said it will be done “before Christmas.”