House tax proposal would hurt New York’s students and families
The tax reform proposal released by the House last week is a wolf in sheep’s clothing – supporters of the plan say it will help low- and middle-class families, but a closer look at the details reveals that those families would instead be hurt.
The House’s proposal takes direct aim at New Yorkers trying to improve their lives by pursuing a college degree. The federal tax code has long been structured in a way that helps students and families before, during, and after college by incentivizing them to save for college, helping them pay for college, and assisting them in repaying student loans. This proposal hurts students and families on all three fronts.
First, the proposal would hurt families working to save for higher education by eliminating one kind of higher education savings account and removing an incentive for employers who help pay for a portion of employees’ tuition expenses. These are two important vehicles families can use to prepare for college expenses; by attacking them, the House plan will make it harder for families to be prepared for higher education expenses.
Second, the proposal would hurt college graduates working to repay student loans at the beginning of their careers. The proposal eliminates the Student Loan Interest Deduction which would mean recent graduates who invested in their future by borrowing for college could pay more in taxes. The federal government already makes a significant profit on student loans, and should not go to the well twice looking for ways to fund tax cuts for corporations.
Third, by taxing private college and university endowments, the House’s proposal would limit the ability of these institutions to provide student aid. It is counterproductive for policymakers to tax endowments, a leading source of financial aid. Endowments are a stable source of funding, used not only for student aid, but also to attract and retain world-class faculty, embark on construction projects, and fund groundbreaking research. This tax would hurt college affordability for students who need it most, and make it more difficult for colleges to perform the research that will help New York create the economy of tomorrow.
The proposed tax on endowments only applies to private, not-for-profit colleges and universities. For those institutions in New York, this is another attempt by government to create a two-tier system that prioritizes students at public institutions over students at private institutions. Not only is this two-tier system fundamentally unfair to students, it is also unfair to taxpayers. When a student chooses to attend a private, not-forprofit college in New York, taxpayers save. No government proposal should prioritize students in one sector over students in another sector.
Coupled with other elements of the tax proposal that would hurt New York families, like elimination of deductions for state and local income taxes and restrictions on mortgage tax deductions, the proposals outlined above will make it harder for everyday New Yorkers to get ahead. New York’s representatives in Washington must put the interests of their constituents ahead of the political calculus that is driving harmful tax and higher education policies.