House Tax Bill Increases Cost of College For Students, Taxes Private College Endowments
November 06, 2017

ACE, Other Groups Write Ways and Means Committee Opposing the Measure, Launch Web Page on Tax Reform and Higher Education

​As the House Ways and Means Committee began to mark up their tax bill Monday, ACE and 45 other associations sent a letter to committee leaders expressing “grave concerns” with the legislation’s impact on students, families, and higher education as a whole.

House Republicans unveiled the Tax Cuts and Jobs Act (H.R. 1) last week. The biggest rewrite of the tax code in a generation, the bill would cut rates on businesses and most individuals in exchange for slashing a wide range of tax benefits. 

“This legislation, taken in its entirety, would discourage participation in postsecondary education, make college more expensive for those who do enroll, and undermine the financial stability of public and private, two-year and four-year colleges and universities,” the groups wrote. “According to the Committee on Ways and Means summary, the bill’s provisions would increase the cost to students attending college by more than $65 billion between 2018 and 2027. This is not in America’s national interest.”

ACE and other associations that work on tax policy have also launched a web page to better explain the impact of tax reform on higher education. There will soon be a “Contact Congress” tool added to the page to help higher education leaders, faculty, staff, and students share views and concerns about the legislation with lawmakers.

Among the provisions that are on the chopping block in the House bill, several broad areas would impact higher education along with other sectors, such as the charitable giving deduction. The measure would increase the standard deduction, which would lower the number of taxpayers who itemize, significantly reducing the value of the charitable deduction. In addition, the bill would scale back the federal, state, and local tax deduction, which ultimately could have a tremendous impact on the revenues available to higher education, as state governments will be under increased pressure not to raise taxes. 

Other provisions are directed specifically at colleges and universities, such as endowments at private institutions. The plan calls for a 1.4 percent excise tax on net investment income on private institutions whose endowments are at least $100,000 per full-time student with at least 500 full- and part-time students enrolled. 

As ACE has long maintained—and has attempted to explain (647 KB PDF) to Congress—such attempts fundamentally misunderstand what endowments are and how they operate. “They are taking away from the schools the money that is targeted to students and sending it to the federal government,” ACE’s Steven Bloom told The Boston Globe over the weekend. 

Still other provisions target students, perhaps most significantly by repealing the student loan interest deduction. Another provision repeals the Lifetime Learning Credit in attempt to streamline the benefits available to students and families. The American Opportunity Tax Credit would be expanded to cover a fifth year in an attempt to fill this gap, but the support is reduced during that year.

Sec. 117(d) and Sec. 217 of the tax code also would be eliminated under the bill. Sec. 117(d) permits educational institutions to provide their employees, spouses, or dependents with tuition reductions that are excluded from taxable income and waive tuition to graduate students serving as research assistants. Sec. 127 allows employers to offer employees up to $5,250 annually in tax-free tuition assistance. 

For more details about the provisions affecting higher education, see this brief summary​ (61 KB PDF).

Under the schedule envisioned by Republican leaders, Ways and Means plans to vote on the bill by the end of the week. The full House would then pass the proposal the week of Nov. 13 before leaving Nov. 16 for the Thanksgiving break. 

Senate Republicans are working on their own competing plan, which they plan to unveil sometime this week. The goal is to have a final bill to President Trump to sign before the end of the year. ​