I thought it necessary to interrupt my regularly scheduled post this week to highlight tax legislation that was recently passed by the United States House of Representatives last week (a similar plan is currently under consideration at in the United States Senate). Specifically, this legislation is concerning in how it potentially increases the tax burden for university students, faculty, and staff, while depleting resources for financial aid, research and teaching. For further background, you’ll find some excellent recent articles here: New York Times, Washington Post, Washington Post (opinion piece).
While this United States bill still needs to find reconciliation with the Senate before it can become a law, the worldview warrants discussion because it affects higher education everywhere. Under the House bill, current tax deductions and credits for higher education expenses would be consolidated, and benefits for students attending school for more than five years or on a part-time basis would be eliminated. The House bill also revokes the current tax deduction for student loan interest, and changes the treatment of tuition remission programs that waive tuition costs for employees. Students may therefore be required to report tuition support as taxable income, which in many cases would be grossly disproportionate to the stipends received.
For example, doctoral students who see tuition waived for working on campus as researchers or teaching assistants would need to report this as taxable income. The huge tax increase they should expect would more than likely swallow up their stipend (if any). To make matters worse, student loans would no longer be tax deductible. While the Senate bill does not (currently) include these provisions, universities as a whole will lose either way. In both the House and Senate bills there is a tax proposed on the net investment income of the university that includes endowments. For some of the larger universities in the United States, this amounts to tens of millions of dollars a year.
Why is this a problem?
Tax cuts have to come from somewhere. To help pay for the $1.5 trillion tax cuts lawmakers have promised, this legislating proposes to collect them from students and universities. Higher education is already out of reach for many in the United States and Canada, and access is linked to socio-economic status. The presence of tuition support is one of the ways we try to offset this difference, and endowment revenue is one of the major ways universities pay for undergraduate, graduate, and professional student financial aid, faculty salaries, research, etc. This bill, if passed in its current form, will limit access to education for lower income families, and conceivably increase income inequality over time.
Mahatma Ghandi once said “A nation’s greatness is measured by how it treats its weakest members.” Is taxing low income students pursuing higher education to benefit higher income earners and businesses really where we want to set the values of our society?
