This month Congress moved to fulfill President Donald Trump’s campaign promise to cut taxes. The House of Representatives passed its Tax Cuts and Jobs Act and the Senate is expected to pass a marked up version of the bill this week. The tax plan, an example of “trickle-down” economics, seeks to simplify the current tax bracket structure and provide large tax breaks for high earners that will likely be supported by increased taxes on the middle class.
According to the Congressional Budget Office, the Senate and House proposals would add over $1.4 trillion to the nation’s deficit over a 10-year period. While neither proposal is budget neutral, how the research community will fare if a final tax bill passes could look very different. The bill that passed in the House includes the elimination of many of the tax credits that allowed students and parents to deduct a number of expenses related pursuing both graduate and undergraduate degrees, increasing the financial burden of pursuing an education. The current Senate markup, however, reinstates many of the deductions proposed by the House.
The table below outlines the difference between current law and the proposed changes presented by the House and Senate.
|Graduate Student and School Employee Tax Assistance
|Establishes qualified tuition reduction and assistance through the Qualified Tuition Reductions and Educational Assistance Programs.
|Repeals Qualified Tuition Reductions and Educational Assistance Programs.
||Same as current law.|
|College Endowment Earnings||Exempts university endowment earnings from being subjected to an excise tax.||Establishes a 1.4% excise tax on the net investment income accrued from endowments at some private universities.||Similar provision to House bill.|
|College Savings Plan||Allows parents to contribute tax free, up to $2,000 annually to Coverdell or a similar state-dependent amount to 529 Education Savings Plans.||Allows parents to use tax-free 529 savings accounts to put away up to $10,000 annually,||Same as current law, except for adoption of House provision allowing for 529 plan establishment for child in utero.|
|The Student Interest Deduction
|Allows any taxpayer with modified adjusted gross income below certain inflation-adjusted amounts repaying student loans to deduct up to $2,500 in student loan interest paid.||Repeals the interest deduction that allows students repaying loans to deduct up to $2,500 for student loan interest paid.
|Same as current law.|
|Tuition and Related Expenses||Allows an individual to claim an above-the-line deduction for qualified tuition and related expenses incurred.||Repeals the deduction that allows students to deduct up to $4,000 for education related expenses.||Same as current law.|
|Student Tax Credits
|Includes three tax credits for higher education expenses. The American Opportunity Tax Credit, The Hope Scholarship and The Lifetime Learning Credit.||Consolidates the three higher education tax credits into the AOTC.
||Same as current law.|
|State and Local Tax Deduction||Taxpayers can deduct state and local taxes, also known as the SALT deduction, against their tax burden. This is the largest tax deduction under current law.||Eliminates the SALT deduction except for a $10,000 property tax deduction.||Eliminates the SALT deduction without exemptions.|
If the tax-overhaul bill passes the Senate, Congress will need to sort out discrepancies between the two versions. U.S. Rep. Kevin Brady R-Texas, chair of the House Ways and Means Committee, has acknowledged that the House’s version, as it stands, is flawed and has vowed to work on the issue of tuition assistance when the bill goes to conference.
The American Society for Biochemistry and Molecular Biology has released a statement opposing H.R. 1 due to the detrimental effects that the bill would have on graduate students and the U.S. budget. The society will continue to monitor the situation and provide updates on changes and amendments to the final legislation as it relates to the research enterprise and the federal budget.
For more on the ramifications of the House’s tax proposal to eliminate tuition waivers for graduate students, listen to the first episode of the ASBMB’s science policy podcast, “Pipettes and Politics.” Listen here.