This article highlights a number of the changes that made it through the House plan earlier this week that will certainly have an impact on families and institutions in my neck of the woods. For starters,
Hundreds of employees at Central New York colleges and universities would see one of their more valuable benefits taxed as income under a sweeping tax overhaul bill...What tax-free benefit will these folks be losing? It's a big one:
The college employees who receive free or reduced tuition for their children would have to begin paying federal income tax on the value of that tuition.Whoa. Or, as my sister-in-law says, YOWSER!
It's a somewhat common practice at many colleges and universities to offer reduced (even totally free) tuition to children of college employees -- that's one reason these institutions don't have that difficult a time getting applicants for open positions. And it not just here in Central New York; the reciprocal Tuition Exchange program lists hundreds of schools not only in the US but also some in other countries that participate in the program, which makes it even more attractive for families and their eligible dependents.
Le Moyne College, for example, covers the full tuition - over $32,800 each - of the eligible dependents who choose to be Dolphins and up to $35K to those who go to participating Tuition Exchange member institutions. Hamilton College, just down the road a bit, covers half of the tuition for their almost 90 eligible employee dependents; full tuition at the school this year is $52,250. The cost of the benefit? Around $2.5 million for Le Moyne employees, and over $2.2 for Hamilton employees. Syracuse University didn't provide details on their program, but we can surmise it's probably a similar number.
I admit I never really thought all that much about it, but when we do think about it, it's really a bonus for the employees, right? Well, if I get a bonus, it's taxed - so why shouldn't this pretty rich benefit be taxed as well? Wouldn't that be more fair? I know it's contrary to the concept of a tax cut, but it does kind of make sense.
That's not all that's changing if the House provisions hold.
- College endowments are going to be hit with a 1.4% excise tax; for Ivy Leaguer Cornell, that's a $10M hit; Hamilton will pay around $650K for this one.
- The deduction for interest paid on student loans would disappear.
- Students working as teaching assistants and researchers would have to pay tax on any tuition that is waived while they serve in these roles.
According to Mary Beth Labate, head of the Commission on Independent Colleges and Universities,
The short-sighted tax plan passed by the House this week will hurt ordinary New Yorkers by erasing critical tax benefits related to higher education and dashing the college dream for thousands of students and families.The total cost nationwide is estimated by this group at $111 billion.
We need to collect all of this extra money, of course, because the GOP agreed to increase the deficit by as much as $1.5 trillion to pay for the tax cuts, even as they insist that won't be necessary because the economy is going to explode with growth. Maybe we'll have three jobs for every American, just like we there are three guns for every American?
The folks who are going to be taking the tax hit on the tuition and the student loan interest? They'll need those extra jobs to pay their taxes if this cut goes through.