November 19, 2017

Taxing Benefits (Again)

Another hit for the education community is nestled in the House tax plan. In Saturday' post, I talked about the plan to tax tuition benefits for dependents of college employees and a couple other changes. Today, it's collegiate athletics that stands to lose - and lose bigly.

According to this report on ESPN, the House plan would eliminate the charitable deduction on the premium that donors pay for the privilege of paying for tickets to college athletic events.
In the proposed measure, Section 1306 would cut deductions associated with charitable contributions for tickets. Not allowing fans to deduct for donations that give them the right to buy tickets would immediately cost college programs hundreds of millions of dollars, according to athletic directors who spoke with ESPN.
The article goes on to note that
For years, college athletic programs have relied on donations associated with season tickets to fuel their budgets. While the price of the season tickets themselves are not tax deductible, fans have been able to write off up to 80 percent of the donation that was required to buy those tickets, a fact that has been heavily marketed by the programs themselves. If the provision winds up in the final tax bill that passes, the ability to write off anything related to the donation would disappear.  
Another YOWSER! from the House Republicans that, at least so far, is not included in the version of the tax plan the Senate is drafting. This is a big darn deal for big-time college athletics.  Here are a few examples cited in the article.
  • a 50-yard line seat at LSU cost $425, with a $1, 025 donation.
  • $4,000 would get you the rights to purchase a single season ticket to Duke basketball games; the ticket itself is $3,000.
  • $4,000 would also give you the opportunity to buy one of the best seats for Alabama football.
Those examples pale in comparison to what it costs for the best seats for an NC State basketball game: $25,000 per seat for the best center-court seats -- for life -- along with $7,200 per year in additional donations, not counting the price of the tickets.  I'm not sure on this one whether it's better to live fast and take chances, so you don't have to spend so much to enjoy Wolfpack hoops, or be like the people in those Glucerna commercials where 'steady' is the goal and you'll live forever, writing the checks year after year after year after year...

Now, as I was with the free tuition benefit that's also at risk in the GOP plan, I'm not sure how aggravated I'm going to get about this one.

I've been called foolish by my husband for never deducting my charitable contributions from my taxes before we got married. I've always donated, but not because of the tax break. Frankly, I'm one of those crazy people who thinks that, if we're going to have an income tax, it should be based on our income and not our outgo - meaning, I should not be rewarded for how I spend my money. If I want to give to charity, bully for me. If I want to gamble it away, bully for me -- but don't reward me for either of those behaviors, because it has nothing to do with my income. (And yes, we do deduct all of our charitable contributions now -- that's one of those compromises married couples make.)

Here's House Ways and Means Committee Chair Kevin Brady, the author of the tax plan, on the reasoning for the proposed change:
I don't believe the deduction was ever intended to apply to donations related to season tickets.
I have to say I agree with him. Charitable donations aren't supposed to give the donor special benefits and access that personally enrich the donor - they're supposed to enrich others, right?
Brady said that the majority of season -ticket holders in college athletics don't have to pay for the rights to their seats; they just pay the cost of the ticket. Since deductions technically cost the taxpayer at large, Brady reasons that the average fan is actually disadvantaged by the deduction at the hands of the wealthy, who deduct the price of their large donations for the right to sit in the best seats. 
I agree with that too, except for one thing. Many of the people who do make these donations, and do take advantage of the tax deductions? They're middle class folks like you and me.

My brother-in-law was not a rich man when he was working, and he's certainly not a rich man now that he's retired. He's just a middle-class guy who managed to get in the mix for season tickets for Syracuse University football and basketball years ago, and he's held onto them ever since he got his foot in the door. So no Chairman Brady, it's not always wealthy people who do this - it's lots and lots of ordinary folks who enjoy supporting their alma mater or their home-town team (or their state's team, in the case of SU...).

I'm all for closing loopholes in the tax code -- I think that's much more important than cutting taxes, particularly when the Republicans find it in their hearts to raise the deficit to do that; if we collect all of the taxes we owe, we will have a better chance at understanding the mess we're in, and be able to focus on a couple of things: cutting spending, paying down our debt, and being able to reduce taxes for everyone, when everyone pays their fare share.

But what will this do to colleges and universities, many of whom stand to lose in the tens of millions of dollars annually for this change, on top of the proposed change to start taxing their endowments? Will this mean cuts in scholarships? Higher costs (when many are already charging more than the country's median salary for a single year of tuition alone)? Fewer people going to college?

What does this do to all of the claims that we need an educated workforce to fill the jobs of the future, which will begin streaming in the second the ink is dry on this tax plan?

And finally, how does this help sell the plan as being a tax cut for the middle class?