The speed and energy behind tax reform in Congress—specifically the Tax Cuts and Jobs Act (H.R. 1)—masks provisions that are extremely harmful to colleges and universities and the students and families hoping to improve their lives through higher education. All leaders in the higher education community, particularly college and university trustees, should contact their congressional representative and oppose this bill.
The House voted to approve H.R. 1 just prior to Thanksgiving—its version of the bill would cost higher education some $110 billion in direct financial benefits over 10 years, including an estimated $65 billion in benefits that students and their families depend on to help finance their education. The Senate version moving this week appears to preserve current tax benefits to students and institutions, but other provisions—specifically the repeal of the state and local tax (SALT) deduction, unfair changes to the tax provisions on college and university business income that no for-profit business would accept, and the disallowance of advance refunding of tax-exempt bonds that significant reduces construction costs—erode the financial stability of our colleges and universities. Together, both bills could result in significant declines in college enrollment and prevent many low-income and middle-class students from accessing the life-changing benefits that come with a college degree.
As a trustee at Spelman College—with responsibilities for my institution’s human, physical, and financial assets both now and in the future—I cannot support H.R. 1. And here are a few key issues that should concern every college and university board member.
- The House aims to “simplify” the individual tax credits and deductions designed to assist citizens in affording a postsecondary education. However, while expanding the American Opportunity Tax Credit (AOTC) to allow students and families to claim this credit for an additional fifth year of support, it eliminates several other provisions—including the Hope and Lifetime Learning Credits—that particularly benefit graduate students, part-time students, and lifelong learners (particularly those seeking retraining). The bill also repeals the Student Loan Interest Deduction (SLID), a deduction that many borrowers can claim to help pay off their loans.
- In both chambers, the bill roughly doubles the standard deduction for individuals and couples. While many would benefit, this change would also decrease the number of taxpayers who itemize—from 30 percent to just 5 percent—and reduce the value of the charitable deduction for most individuals and families. For both private and public colleges and universities, private donations are crucial to funding initiatives that are vital to institutional mission. Diminishing incentives for private citizens considering charitable gifts and donations to colleges and universities could lead to a significant drop in giving—according an analysis by Congress’s Joint Committee on Taxation.
- Although both versions of the bill impact the State and Local Tax (SALT) deduction, the Senate’s version would significantly impact state budgets. Many localities, already facing budget constraints, could cut higher education funding that supports grants, tuition assistance, or other forms of direct assistance to students. State support in higher education has been declining over the long term, and this provision will likely exacerbate this issue, raising the cost of college for students and families.
- Both the House and Senate versions of the bill propose an excise tax on investment income for private college and university endowments with assets valued at $250,000 or more per student. While limited to nearly 70 institutions, this tax would significantly impact how these institutions spend endowment funds and would set a dangerous precedent for taxing institutional endowments in the future. Endowment funds are used to support student financial aid, scientific research, and other critical mission-related activities. Under this new provision, thousands of endowment dollars would be redirected to the U.S Treasury, and not to the hardworking students who need them.
- The House version eliminates private activity bonds, which denies access to the tax-free bond market for private colleges and universities and complicates many productive public-private partnerships.
Throughout the past year, the higher education community has offered suggestions to tax writers, sharing insights into the sector and how it operates. We were hopeful that this input would prompt lawmakers to consider how tax policies impact their constituents in real and direct ways. In their zeal to fund new cuts in the corporate and personal tax rates, members of Congress have ignored the concerns of higher education stakeholders and missed out on making good policies that would help more people access the benefit of a higher education. Reforming our national tax system and educating our citizenry are critical. Unfortunately, this bill chooses one over the other.
In the coming weeks, university and college trustees will play a pivotal role in opposing the current provisions. Many trustees consider themselves friends and supporters of representatives and senators in Congress. In collaboration with presidents/chancellors and senior leaders, I encourage my fellow trustees to contact their members of Congress—especially in the Senate, where H.R. 1 will be considered this week—to discuss why H.R. 1 cannot be enacted in its current form. If trustees (myself included) do not voice our concerns, we endanger the missions of our colleges and universities, the success of our students, and the future of our nation.
Additional Advocacy Resources
- AGB Alert: Impact of Tax Reform on Higher Education
- AGB Sample Letter to Policymakers on House Tax Reform
- Tax Reform and Higher Education Website – includes summaries of both versions currently in Congress, section-by-section reviews, an FAQ, and resources from many different higher education associations