What’s In the House Tax Plan: Education
The House is considering the “Tax Cuts and Jobs Act” Republicans proposed last week. This GOP plan impacts a wide range of tax benefits that women and families rely on, including education benefits. The Joint Committee on Taxation calculated that the plan would cut about $65 billion in education tax benefits over a decade. Here are some of those tax changes that impact women and families:
- Repeals higher education tax credits as part of the plan’s “simplification of education incentives.” The GOP tax plan proposes consolidating three tax credits for higher education into one, modified American Opportunity Tax Credit. Simplification may sound positive at first, but as they say, the devil is in the details. For example, take the Lifetime Learning Credit (LLC), which can reduce tax bills for students by as much as $2,000. The LLC has benefited millions of students in a wide range of education programs including part-time programs, graduate school, and job training programs; it also has no limit on the number of years of education for which it can be claimed. The current AOTC, on the other hand, can only be claimed for the first four years of higher education, cannot be used for part-time students, and must be used for pursuing a degree or certificate. While the tax plan proposes extending the AOTC to allow students to claim it for up to the first five years of higher education, the new AOTC does not come close to compensating for the proposed elimination of the LLC. Part-time working students and students in job training programs that do not lead to a degree or recognized certificate would be ineligible. Students claiming the AOTC for their fifth year would only get half the size of the tax credit ($1,250), and students would receive no AOTC for higher education after those first five years. This “simplification” of education tax credits would cut $17.3 billion in education tax credits and would increase taxes for many students, especially graduate students facing rising tuition costs.
- Eliminates the student loan interest deduction. Currently, individuals with income up to $80,000 ($160,000 for joint return) can deduct up to $2,500 of interest they paid on student loans in a given tax year. About 4 million taxpayers benefitted from this deduction for tax year 2015. Repealing this deduction would impact women, who hold about two-thirds of all student debt (more than $800 billion). The repeal will especially hurt Black women, who face the highest levels of student debt. In 2012, Black women graduating with a bachelor’s had a mean cumulative debt of $29,051 (compared to a mean of $20,907 for all women and $19,454 for all men), and 34 percent of Black women accumulated more than $40,000 in student debt. Only 12 percent of Black women graduated with a bachelor’s degree with no student loan debt. Instead of increasing taxes on people repaying their costly student loans, Congress should invest in programs that expand educational opportunities for women.
- Eliminates the teacher supply deduction. As if eliminating benefits for students isn’t enough, the GOP tax plan eliminates a tax benefit for teachers as well! Women comprise the overwhelming majority of teachers. Many dedicated teachers spend hundreds of dollars of their own money on supplies for their classrooms when students and school districts cannot provide them. About 4 million teachers benefitted from the Educator Expense Deduction in tax year 2015.
The GOP tax plan would also restrict AOTC eligibility by denying access to immigrant students without a Social Security Number, repeal the exclusion for tuition waivers and tuition exemptions from graduate students’ taxable income, and tax tuition assistance many students receive from their employer.
These education tax benefit cuts are part of the overall scheme of the GOP tax plan—making women and families pay for tax cuts for millionaires, billionaires, and wealthy corporations. But the plan does not stop with reductions in tax benefits for women and families—it would add $1.5 trillion to the deficit that will threaten critical investments including Pell Grants and other education programs.
Women and families cannot afford this tax plan.