Tax Bill 'Simplification' Is Code for Higher Education Cuts

"The federal government provides many tax benefits to help students and families pay for higher education. Although well-intended, these credits and deductions can often be confusing and may not interact well with other forms of federal grant aid. That's why there are frequent calls for reforming these benefits, including bipartisan efforts on Capitol Hill," Ben Miller writes for the Center for American Progress.

"Unfortunately, the House Republican tax reform bill unveiled November 2 does not lay out a serious vision for improving higher education assistance through the tax code. Instead, it uses misleading claims that it is simplifying benefits. In reality, this “simplification” cuts tens of billions of dollars in assistance for students and families, with the savings going to fund tax breaks for millionaires, billionaires, and corporations.

The bill’s proposed changes to higher education tax benefits are just a small part of a larger agenda, but it is particularly important to understand the bait-and-switch going on because the same tactics are likely to be used when the Higher Education Act is reauthorized, as soon as next year.

The tax code currently has three main types of benefits related to higher education that go to students and their families. One is tax credits, which taxpayers can deduct from their final tax bill, reducing what they owe or increasing their refund. Another is deductions, which are subtracted from a filer’s income, thereby lowering the total amount of money on which taxes are computed. The third is exclusions. This allows certain benefits to not be counted as taxable income. The total size of these tax benefits is quite large—about $23 billion per year, or about the same size as the federal Pell Grant for low-income students."

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Publication Date: 11/9/2017

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