What is the tax bill?
The U.S. Senate tax bill, also called the Tax Cuts and Jobs Act, is the “biggest tax cut in history” according to President Donald Trump. The Senate bill differs from the House of Representatives bill passed mid-November. The Senate tax bill is nearly a $1.5 trillion tax bill which President Trump claims will help the economy by lowering taxes for American businesses and families. The Senate bill reduces taxes on corporations, changes the individual tax code and expands the standard deduction. The House bill and the Senate bill now must be reconciled to create a final tax bill to be put on the president’s desk by Christmas time.
How do the bills differ?
One of the main changes in the House tax bill is the reduction of the tax bracket from seven brackets to four. The Senate tax bill keeps the seven brackets but changes the rates. The tax rate for corporations would drop from 35 percent to 20 percent starting in 2019. Both the House bill and Senate bill nearly double the standard deduction, resulting in, for many taxpayers, a higher overall tax rate.
What is the controversy around the bill?
The bill was passed only hours before the final vote with handwritten notes in the margins in attempt to try and get a majority vote. Democrats argued there was not enough time for members to read the bill. The bill not only works on the taxes in the U.S. but also makes changes to health care, which is expected to lead to 13 million Americans dropping insurance, opens up more land oil drilling in Alaska and alters the treatment of state and local taxes. This ultimately could affect local government budgets for schools and roads. The bill is also projected to add more than one trillion to the already hefty 20 trillion dollar U.S. national debt.
How does the tax bill impact St. Joe’s students and their families?
In an email to students, St. Joe’s President Mark C. Reed, Ed.D., urged students to stay informed about the tax bill and how it will impact students and their families. Reed highlighted implications in four major areas:
1) The repeal of the student loan interest deduction.
What this means: According to the IRS, about 12 million people claimed the student loan interest deduction in 2015. More than 40 million Americans have student debt, so the impact would be significant for many families with existing student debt.
2) Significant curtailment or elimination of tax-exempt financing for construction projects, infrastructure and campus improvements.
What this means: The new tax bill eliminates the tax exempt status of municipal bonds. According to The National Association of Counties, these bonds are predominantly issued by state and local governments for governmental infrastructure and capital needs purposes and to help pay for public projects such as the construction or improvement of schools, streets, highways, hospitals, bridges, water and sewer systems, ports, airports and other public works.
3) Taxation of faculty and staff tuition benefits for themselves, spouses, or dependent children.
What this means: The Senate plan, which has already cleared committee, left out many provisions of the House plan directly affecting student benefits. But it included a proposal that would create new costs for nonprofit entities like universities with business income unrelated to their core educational mission. Additionally it would tax income on royalties for licensing a college’s name and logo. A provision that eliminates the ability to deduct any state and local taxes from a taxpayer’s federal liability could have even bigger long-term consequences for public higher education by placing a huge strain on state budgets.
4) Taxation of graduate student tuition waivers.
What this means: Under the House bill, the value of college tuition benefits conferred on thousands of university employees would now be taxed, one of several provisions that would impact colleges, universities and their students. Tuition waivers are considered taxable under the bill.
