Opposing Tax Reform Bills and Negative Implications on Education

On Nov. 28, the U of R student body received an email from University President Ralph Kuncl in response to the GOP tax bill. Kuncl’s letter specifically states the reasons he believes the bill could be potentially harmful to the University of Redlands community, such as employer tuition waiver assistance programs, taxation of endowments and elimination of lower-cost, tax-exempt bond financing for private universities, student loan interest deductions, Lifetime Learning Opportunity Credits, and charitable deductions.


According to the The Joint Committee on Taxation, the proposals are estimated to cost students and families pursuing higher education an additional $71 billion over the next 10 years.


The University of Redlands is a member of the Association of Independent California Colleges and Universities (AICCU). In his email, Kuncl referenced a letter released by the AICCU stating that “while simplifying the tax code is a worthwhile and important goal for our nation and economy, it should not be achieved at the expense of making it more difficult to obtain a college education or increasing the cost of education.”


The bill cites changes including the elimination of Student Loan Interest Deduction (SLID), which would increase difficulty for people to pay off student loan debt. According to AICCU’s letter, the current policy allows a filer to claim up to $2,500 of the interest paid on a qualified student loan. Therefore, filers can claim a deduction without having to itemize that deduction. The elimination of SLID would add an additional tax for those who are in need of student loan assistance in order to pursue their education. 12 million people benefitted from SLID in 2014. It is estimated that if eliminated, the cost of student loans by borrowers could go up by $24 billion in the next decade.


The bill would also eliminate tuition reduction for graduate students. According to the AICCU this would result in a tax increase for many graduate students, potentially discouraging them from pursuing further education.


The AICCU said they are opposed to multiple provisions made in the proposals and highlighted some parts of the bill that will affect institutions within the AICCU, like the U of R.


Both bill proposals include a 1.4 percent excise tax, (taxes paid when purchases are made on a specific good) on the investment income of certain nonprofit colleges and universities where there is an estimated endowment value at $250,000, per full-time student.


“This tax, coupled with the elimination of the tax-exempt bonds for nonprofit institutions, shows an explicit targeting of the private, nonprofit higher education sector,” the AICCU stated. “The result will further drive up costs and harm student access to independent institutions. This tax sets a precedent for all of higher education.”


According to the AICCU, six California institutions would be impacted by the excise tax: California Institute of Technology, Claremont McKenna College, Harvey Mudd College, Pomona College, Scripps College, and Stanford University.


Also, private activity bonds, used by nonprofit colleges to finance capital projects would be eliminated. According to the AICCU, this repeal would not allow these institutions to use lower-cost, tax-exempt bond financing. Essentially, the AICCU said it will raise the cost of new construction for facilities such as libraries or laboratories.


The bill would repeal the Lifetime Learning Credit that enables a fifth year of support for nontraditional students and those receiving job retraining that benefit from the American Opportunity Tax Credit (AOTC). The AICCU wrote, “we are extremely concerned that the ‘enhanced’ AOTC, as written, would simply preclude graduate students, part-time students, lifelong learners (particularly those seeking retraining), and any student taking longer than five years to complete their education, from accessing the AOTC.”


The bill would also discontinue the tuition waiver given to employees of institutions to help pay for their children’s tuition. It would also remove employer provided compensation for working students which incentivizes employers to provide up to $5,250 in tuition assistance.


Additionally,  Charitable donations would be disincentivized. According to the AICCU, the proposed bills would lead to a decline in charitable donations and many institutions depend on charitable gifts in order to support teaching, research, faculty, cultural activities, libraries, and facilities. Financial aid can also be a product of charitable donations.


“As someone within our University community who values the lasting impact of higher education, you are strongly encouraged to reach out to your Congressional representatives and express your opposition to the proposed changes in tax policy, which will negatively affect higher education institutions including the University of Redlands,” Kuncl wrote in his email to the university.


“Staff from the offices of both Senators Feinstein and Harris have encouraged AICCU members to weigh in with the California Congressional Delegation,” Kuncl continued.


Kuncl’s letter encourages students and faculty to oppose the bill and included websites which provide information on effective ways for people to lend their voice and opinion on this matters including, charitable giving ,  endowments, students and families , campus employees, and higher education finance. He also provides resources for students interested in learning more about advocacy and tax reform, as well as contact information for Congressional representatives.


The GOP tax bill was passed by the House of Representatives on Nov. 21 and the Senate passed their respective bill early Saturday morning. Now, both chambers will have to come up with compromise on a final bill, which will then need to be signed by President Trump before it’s enacted into law.


photo courtesy of Halie West, Redlands Bulldog photo editor