Daniel Katz reviews the many ways in which the tax plan now being debated and being pushed to an early vote without hearings will have deleterious effects on students in higher education and in K-12.
He writes:
“A great deal of ink has been spilled on how the Republican tax bill working through Congress would impact higher education for the worse. The highest profile item is the plan in the House bill to tax graduate student tuition waivers as income, effectively making the young people who are helping the nation move forward with critical research pay taxes on “incomes” that are tens of thousands of dollars higher than they actually get paid. However, higher education takes multiple hits in the House bill such as taxing endowment earnings that go towards school advancement, reducing incentives for charitable giving, and eliminating student loan interest deductions that benefited 12 million borrowers in 2014.
“For a bill that the G.O.P. is trying to market as a “boon” to the middle class, the House bill does not just tax graduate student tuition waivers, but also it takes aim at tuition benefits for higher education employees and their children. The New York Times portrayed a 64 year old night custodian at Boston College who managed to send all five of his children to college using such a benefit and who would never have been able to do so under the House bill. Assurances from House leaders that their bill would grant most Americans so much tax relief that they would not need those benefits ring hollow as analyses show that various provisions in the bills could result in $1.6 trillion dollars of tax INCREASES on middle class earners over the next decade.
“So while the House and Senate bills are not friendly to higher education (the Senate bill somewhat less so), there has been little talk about the potential impact on K-12 education if the Senate bill passes, is reconciled with the House bill, and sent to the Oval Office for splashy signing ceremony. There are several provisions in both pieces of legislation that would take serious aim at K-12 education at the state and local funding levels. Reporters and editorials have stressed that eliminating the deductions for state and local taxes (SALT) including property taxes, as in the Senate bill, will heavily impact Democratic leaning states with higher tax burdens, but the Governmental Finance Officers Association (GFOA) reports that eliminating SALT deductions from the tax code will have a broadly negative impact on tax payers in all states. According to the GFOA findings:
*30% of tax units use the SALT deduction.
*60% of deductions for earners under $50,000 a year come from property taxes and the loss of the deduction would negatively impact home ownership and price stability.
*30% of earners between $50,000 and $75,000 a year use the SALT deduction. 53% of earners between $75,000 and $100,000 a year use it.
“Income earners at all levels would see their taxes go up if the SALT deduction is eliminated.
More importantly from a public school perspective: the loss of the SALT deduction would apply significant pressure on states and municipalities to reduce taxes in order to offset the increases in federal taxes paid by their constituents. Using the 8th Congressional District in Texas north of Houston as a model, the GFOA estimates that the district would see an increase in federal taxes of $306 million dollars. Offsetting that with state and local tax decreases could impact $125 million in school funding. Simply put: education funding is an enormous local and state expenditure, and it would have to be cut in order to provide any relief to tax payers who lost SALT.”
This, it is wrong to assume that the removal of the SALT deduction would harm only blue states. As Katz shows, it will cut funding to most schools.
Read on to learn the many ways that education funding will be slashed because of this tax bill that fattens the bank accounts of the richest.
Reblogged this on David R. Taylor-Thoughts on Education.
Almost all of these Republican initiatives will harm middle-class and working poor parents. These bills are an abomination and one hopes that US citizens will vote accordingly in 2018 and in the 2020 elections. We have to make it happen or else this country is doomed.
Keep these posts coming. This issue is bigger than any other with the exception of nuclear weapons. It will affect everyone for decades to come and may impact whether this country will remain a leader in world affairs of if we will become the biggest banana republic in history. Wrote a letter to the editor of my local paper two days ago and will post if it does (or does not) get published.
Meanwhile thousands of paid “education advocates” are attending yet another conference led by Jeb Bush and Betsy DeVos, where public education funding will be completely ignored
all the ed reform cheerleading in the world won’t pay the bills at tens of thousands of working and middle class public schools but apparently the Best and Brightest can’t be bothered with practical concerns.
If they say ‘innovation’ and ‘disruption’ enough they’re hoping no one will notice public school funding goes down every year they are in power.
Are they just really lousy advocates? How is it the more paid ed reform advocates there are the worse it gets at the public schools 90% of people use? Something seems off there.
“Bush was the keynote speaker at the morning session on the ExcelinEd summit in Nashville. ExcelinEd supports improving education both in traditional public schools and outside them and supports school choice. Bush serves as the group’s chairman and president.”
Can someone point me to a specific example in any public school anywhere in the country where ExcelinED has “improved education’?
Ed reformers like the term ‘value-added’
what value has Jeb Bush’s charter and voucher lobbying shop added to ANY public school? specific examples, please i’m not impressed with the word ‘innovation” repeated over and over. That’s not actually valuable.
LOTS of paid adults in ed reform. What’s the value-add?
Jeb is a mouthpiece. Wonder what kick back he’s getting?
This tax plan offers a trickle down of misery and increased poverty and debt. This is the most regressive tax plan I can remember. It does a reverse ‘Robin Hood’ on the working class to benefit corporations and billionaires. We all may soon be Kansas or even Chile under this disastrous, short-sighted scam.
The Trump/Ryan/McConnell/Republican budget is indeed terrible for America. It will deliver massive tax cuts to the people who need them the least, and it will add substantially to the national debt, which will then be used to justify cuts in Social Security and Medicare. It will not stimulate the economy or increase revenue as promised.
However, it’s equally true is that because of the standard deduction, the SALT (and mortgage-interest) deduction is largely claimed by the fortunate, not the poor. Someone with an adjusted gross income of <$50,000 who is itemizing deductions and claiming state, local, and property taxes on their return almost certainly isn’t someone who’s middle-class; it is precisely someone like Donald Trump in 2005.
SALT and MI deductions are drivers of educational inequality; part of a scheme designed to protect and enhance the property values and wealth of (overwhelmingly white) homeowners. If you live in a state like NY where most school funding is derived from property taxes, and where the wealthier a district is, the more it funds its own schools, the SALT deduction is a prime contributor to the inequality in spending. People living in restrictively zoned suburbs like Scarsdale and Manhasset should not get to write off the cost of operating exclusive over-funded schools for the sole benefit of their own children any more than people who send their kids to Dalton or Trinity should get to write off the cost of tuition.
Repealing the SALT and MI deductions is progressive, not regressive, and it would have been a signature accomplishment for a Democratic president. It is a shame that it appears it is going to happen as part of a package that will do great harm to the country for decades.
I disagree, Tim. The elimination of deductions for state and local taxes will rob state and local governments of revenues. It will reduce property values. People earning $50,000-$125,000 are not rich. They are middle-class. Taking away that income tax credit reduces their income and devalues their single biggest asset—their home.
A household with an AGI of $100,000 is comparatively well-off, even in a high-income region, and subsidizing their homeownership not only directly takes away revenue that could go to the less fortunate, it can also exacerbate affordable housing issues. A double-whammy.
Again, the idea that these deductions substantially benefit the middle class is mostly a myth. The Washington Post awarded Nancy Pelosi two “Pinocchios” for her claims about the deductions’ impact on the middle class; the charts here show vividly how much it benefits the wealthy:
https://www.washingtonpost.com/news/fact-checker/wp/2017/10/27/nancy-pelosis-claims-on-middle-income-taxpayers-and-statelocal-tax-deductions/?utm_term=.90e4a982ef74
The only thing we know for sure would happen if these deductions (not credits) were repealed (by themselves, not as part of the ill-conceived Trump/GOP plan) is that the federal government would raise an extra $100-110 billion per year. States and local governments would collect at the same rates they do now. Sure, there might be pressure to lower income and property taxes, but that pressure exists even with the SALT deduction: just look at the eye-poppingly high and enduring support for Cuomo’s signature property tax cap, or Chris Christie’s approval rating. Housing inequality is income and opportunity inequality, and the SALT/MI deductions play a large role in it.
Tim, I like this comment to the linked article: “The people making $100K if the SALT deduction is eliminated, but they’ll also feel that smaller increase more than the wealthy will feel a larger increase. If you’re making <$25K/year, $500 is a decent chunk of money. If you’re making $199K/year, are you really going to miss that extra $2.8K?”
Funding schools with property taxes is a driver of inequality in ed, coupled w/ widening rich-poor divide, class-segregated housing, et al. SALT deduction reflects something else– 150 yrs of refraining from double-taxing the same income, for which there are solid, historical reasons. Repeal the SALT deduction, you don’t change the economic drivers of inequality in ed. You just (a)reduce the ability of hi-pop hi-tax states to raise local revenues to support schools, firemen, policemen, sewer & water, etc throughout the state, (b)reduce the ability of their state govts to levy taxes for social programs, (c)depress the housing market, which among other things costs a lot of wkg-class jobs.
“If you’re making $199K/year, are you really going to miss that extra $2.8K?”
[spit-take]
Flerp spit-take – ok you caught me there. Amend to “if you’re netting 199k after taxes?
Tim’s arguments are doing serious damage to my walls and head from all the banging they cause. The conclusion that SALT and MI deductions are regressive result from false intellectual contortions of which my brain is not capable of doing. Rather than get into a long discussion, what, Tim, is your proposed solution? How does taking away the deductions taken by middle class families improve education in any way, especially for underfunded schools?
GregB, I just saved you money. You can’t deduct the cost of fixing those holes from your taxes now, but you can add the expenses to the basis value of your home and reduce your tax bill when it comes time to sell. You’re welcome!
The idea that homeownership and the tax code substantially worsen inequality isn’t really that controversial. I’d suggest Googling papers and articles written by Edward Glaeser to learn more in depth.
A home should cost as much as the land under it, the cost of the labor and materials used to build it, and a profit for the builder. In much of “flyover” country, housing markets work efficiently and buying a house isn’t a great long-term investment.
In metro areas, particularly on the coasts, the true cost of housing is distorted by exclusionary zoning (with its ugly racist implications) and high property taxes. The direct consequence of the beautiful, leafy, lot-size-minimum NY, NJ, and CT suburb is the low-income inner city neighborhood with an affordability crisis.
The European countries that we laud for their approaches to income equality have laws and tax codes that privilege homeownership far less than ours, if at all. The homeownership rate in Germany is about 50%. A few countries even go so far as to tax homeowners on imputed rent (which in the US is another huge wealth transfer from the poor to the rich).
I’ll say it again: the Trump/GOP plan is bad. But if repealing the property tax, state/local tax, and mortgage interest deductions could be done on its own, it would make housing more affordable and reduce income and opportunity inequality.
https://www.washingtonpost.com/news/fact-checker/wp/2017/10/27/nancy-pelosis-claims-on-middle-income-taxpayers-and-statelocal-tax-deductions/?utm_term=.90e4a982ef74
Nice sophistry, but you did not even try to answer either of my questions. Your European example of home ownership is ideological myopia. Home ownership is a small part of spending covering a whole range of issues that the U.S. neglects and ignores. Hence a much higher standard of living and overall satisfaction with quality of life. You would rather choose to cherry pick one issue rather than look at the entirety of tax policy. Just like a good, servile congressional Republican.
Tim, as usual, focuses on the “unfair” deduction that benefits middle class Americans. We can always count on Tim to “stick his neck out” to support the same things the right wing billionaires support. And not because Tim is their paid lackey. He just coincidentally believes that everything they say and do is terrific for the country!
Tim, as the paid shill of billionaire reformers never mentions the “unfair” deductions that favor billionaires. How can he? His job is to ignore that and focus on anything that benefits non-billlionaires who don’t help his bank account.
One day Tim will surprise me and actually criticize something that the right wing billionaires want. But I can’t imagine what it will be. We know it won’t be when the billionaires’ favorite charter schools are targeting large numbers of African-American kindergarten children for harsh suspensions – the billionaires LOVE that! We know it won’t be the low taxes paid by the very richest Americans — the billionaires love that, too! We know it won’t be Betsy DeVos and her “let’s put religion – but only the Christian religion – back in public schools” policy. The people he admires adore Betsy DeVos.
But some day Tim may surprise us all. Probably after his own family is rounded up with the other collaborators that the right wing no longer has use for. Of course, then it will be too late.
The idea that tuition for graduate students will be taxed is tantamount to placing a tax on learning itself. It is well known that republicans hate learning and the academic approach to anything other than investment. To tax tuition money graduate students earn will mean fewer graduate students looking into ways the country is going down the drain. It will mean fewer smart people getting degrees that are meaningful. To teaching, it will mean more people who do the three and out thing and go on to another field.
All this is exactly as the conservative approach plans. Make sure no one is aware when a policy is actually counter to what it says it will do. Less education means justification for lower wages. A few oligarchs and many drones. What a wonderful vision for society. I enjoy the study of medieval Europe. I do not think I would have enjoyed living in it. I may get the chance.
If only they would describe what they are doing honestly, without the lies and sugar coating
Man, am I glad I had just swallowed that last sip of hot dark chocolate before reading that.