House Tax Bill Would Cost Endowment, Grad Students

FILE - In this Tuesday, Sept. 6, 2016, file photo, an American flag flies over Capitol Hill in Washington, as lawmakers return from a 7-week break. The federal government recorded a deficit of $107.1 billion in August, slightly lower than the July deficit. But the imbalance through 11 months of this budget year is up sharply from a year ago, reflecting higher spending and lower-than-expected tax revenues. (AP Photo/Susan Walsh, File)

The House of Representatives passed an extensive bill last Thursday that cuts taxes for corporations and many people—but would take away previous benefits for various constituents of the Boston College community. Particularly, the bill will tax the University endowment, tax the value of college tuition benefits granted to BC employees, eliminate a deduction in interest paid on student loans, and repeal the tuition tax break for graduate students.

The proposal calls for a 1.4 percent excise tax on the endowments generated by large, private institutions, such as BC. The University announced in September that its endowment had reached $2.4 billion.

While state colleges and universities are not subject to this provision, private institutions that have at least 500 students and assets valued at $100,000 or more per full-time student would be affected.

In an official University statement on the proposal, BC denounced it because of its negative effects on students and philanthropic donations to school.

“The GOP proposal has faced universal opposition among institutions of higher education because it would hurt students who are dependent on financial aid while removing the philanthropic incentives that have helped American colleges and universities to become the envy of the world,” the statement says. “We encourage all members of the BC community to share their opposition with lawmakers while we continue to work with our various associations to oppose this legislation.”

Provost and Dean of Faculties David Quigley said he is troubled by the proposal.

“I would simply add my own concern for the ways in which current debates seem to be targeting higher education and jeopardizing a set of policies and practices that have long helped to sustain America’s world-class system of higher education,” he said in an email. “I continue to work with many colleagues at Boston College and at peer institutions to make the case against the many ill-considered proposals that are being explored.”

Republicans drafted the bill to simplify the nation’s tax code and cut rates for middle-income Americans. To compensate for revenue lost in the $1.5 trillion tax cut, lawmakers eliminated some individual tax breaks. As a result, while families and corporations would see tax cuts, a large percentage of undergraduate and graduate students would see their tax bills increase, as explained by The New York Times.

One such benefit lost in the plan is the value of college tuition benefits granted to University employees. Fred Vautour, who has worked the graveyard shift as a janitor in Robsham Theater for the past 17 years, famously used BC’s tuition benefits to put his five children through college. His children rounded out their financial aid with scholarships and small federal loans, and Vautour paid only about $3,000 per year for other expenses.

“Coming to a place like this, you might not make the big bucks, but the benefits are incredible,” he said. “Putting my kids through college was like making the big bucks.”

However, he feels that the new tax structure would have made it impossible for him to pay for his kids’ educations. Any benefits that one receives as an employee that is free of the cost of tuition would now be taxed under the plan, significantly increasing the taxes they face.

“Students get football scholarships, academic scholarships, and Presidential Scholarships given to them without taxes,” he said. “So why should we as employees have benefits that we have to start paying taxes on?”

In addition to campus employees, many undergraduate and graduate students would see tax increases, since the tuition that universities waive for them in exchange for working on campus as researchers and teaching assistants would be deemed taxable income. About 27,000 undergraduates and 145,000 graduate students receive this kind of tuition waiver, according to a 2012 survey, the most recent data available, by the American Council on Education.

BC has 3,837 graduate students, according to the University’s 2017 Annual Report. Bryn Spielvogel, GLSOE ’20, feels that the tax increases will exacerbate the wealth gap, limit the talent coming into graduate programs, and force students to accrue massive debt or come.

“I’ve actually talked to some students who will have to drop out of grad school if this part of the tax plan goes through,” Spielvogel said. “Schools with high tuition like BC will probably be hit hardest because attending grad school will become unaffordable for the vast majority of people.”

Students who take out loans to pay their taxes would no longer be able to utilize a deduction on interest paid on student loans, which can amount to as much as $2,500, as CNN Money said. The deduction eases the burden of the cost of tuition by saving people a maximum of $625 a year.

For Spielvogel, part of the reason graduate students can afford their educations is because they can start to pay off the cost at a reasonable rate. But cutting this deduction makes it more challenging to pay off tuition and afford Boston’s high cost of living.

“Getting rid of this deduction increases the tax burden on grad students once again and will make it harder for us to keep our heads above water,” Spielvogel said. “Many people will need to reconsider grad school if paying off debt while in school becomes less feasible.”

House Republicans say the higher education provisions of the new proposal enable the implementation of a broad tax cut.

“If you look underneath the rate, more of your income is taxed at a lower rate, and so according to the Joint Committee on Taxation — which is the official scorekeeper of these things — every single person, every rate payer, every bracket person gets a rate cut,” Ryan said in a Nov. 7 interview on the Rush Limbaugh Show.

However, for the tax benefits previously associated with higher education, the story is different.

“The tax plan is not affecting the rich,” Vautour said. “It’s the middle guy that affected. … We’re screwed again.”

Featured Image by Susan Walsh / AP Photo