A tax bill House Republicans introduced Thursday would cut tax benefits for college students and higher education institutions.
The plan reduces tax credits college students receive for tuition by categorizing employer-provided tuition payments as taxable income and eliminating a deduction on the interest college alumni pay on student loans. Employer-provided tuition payments are tax-free payments employers pay toward student workers’ tuition.
The bill also aims to reduce corporate taxes and estate taxes. In addition, the bill would reduce the number of income tax brackets and raise tax rates for low-income individuals. Previously, people earning up to $9,325 paid 10 percent in income tax. Under the new plan, individuals earning from $12,000 up to $45,000 would pay 12 percent in income tax.
University of California spokesperson Ricardo Vazquez said in an email the UC does not support the bill because the proposed changes to the tax code would make college more expensive for students and their families.
The University estimates at least 30 percent of UC students depend on the current law’s tax provisions, such as higher education tax credits, to afford tuition, housing and fees. Vazquez said families just outside the eligibility for financial aid will be most affected by the plan.
“The legislation will hurt UC students and their families who are just out of reach of need-based financial aid programs, but still struggle with the cost of attending college,” he said.
He added the UC is particularly concerned about the legislation’s impacts on charitable donations, unrelated business-income taxation, non-taxed bonds, higher education benefits and employer-employee tax provisions.
Unrelated business-income taxation are taxes on independent businesses that seek to benefit from the tax-exempt status of colleges. Nontaxed bonds are issued by state and local governments independent of federal taxes.
Jason Oh, a UCLA School of Law professor who studies taxation and public finance, said part of the bill would reduce tuition waivers, which help graduate students reduce costs of attending college. He added since UCLA students are from a variety of backgrounds, it would be difficult to predict in the short-term how the tax plan would affect the general student body.
Vazquez said the UC plans to work with congressmen and senators to provide feedback on the bill. The Committee on Ways and Means will debate the tax bill this week.