Trump's Tax Bill: Grad Students in the Crosshairs?

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Donald Trump believes revenge is a dish best served daily. A recent feature in the New York Times tells that “before taking office, Mr. Trump told top aides to think of each presidential day as an episode in a television show in which he vanquishes rivals.”

Well, if you’re a college student or a millennial, beware. You are one of Donald Trump’s rivals and he does want to vanquish you.

USA Today exit polling found that voters between the ages of 18 and 29 chose Hillary Clinton over Donald Trump 55 percent to 37 percent in the 2016 presidential election. The same polling indicated that, had this demographic alone decided the election, Clinton would have secured the electoral college vote by a margin of 504 to 23.

So if Donald Trump is crunching the numbers, he has every reason to think of you as the enemy. Your voting trends reveal an overwhelming distaste for the man in the Oval Office. And now, with a massive tax reform bill ramming through both houses and landing on our doorstep in 2018, you’re right to wonder if Donald Trump is using this legislative event to get even with you.

We were curious too. Of the millions of Americans who are about to feel Trump’s wrath—notably, property taxes will go up in a dozen states that broke for Clinton in the election—how will college kids and recent graduates fare? What impact will the tax bill have on college students, Millennials, and nontraditional students?

Well, in a lot of ways, this tax bill is still unfolding before us. For a comprehensive reading on its likely impact, check out the key takeaways as identified by the Washington Post. As for its impact on college students and Millennials, we’ll try to hit you with the highlights right here.

Doubling the Standard Deduction

One notable change relates to small-scale private donations to colleges and universities. After you graduate, your college is going to call you and ask you if you’d like to donate a few bucks to your Alma Mater. If you had a good college experience and you make a good living, you may even get out your checkbook and donate to improved research facilities, campus transportation, or a re-sodding of the school’s football field.

Historically, in addition to the gratification you’d get from giving to a worthy cause, you’d also have the ability to write off your donation as a tax deduction.

However, the new tax bill doubles the “standard deduction” for most tax payers. If your standard deduction exceeds the amount that would be deducted for itemized expenses, your itemized expenses are irrelevant. This removes one important incentive for small-scale charitable giving.

While personal gratification may remain a motive for some, a far larger number of Americans will now take the standard deduction. For these taxpayers, there will be nothing to gain from itemizing small private donations, whether to colleges, universities, or any number of other charitable causes.

Colleges are justifiably concerned that this will have a chilling effect for graduates who are on-the-fence about making donations. And if you’re one of the poor student-schlubs who has to sit at a phone bank calling recent graduates and asking for donations—I did this low-paying job briefly and poorly during my freshman year at Rutgers—you’ve just lost a major selling point.

So not only do colleges have to prepare for a hit to their donations, but most of them will also have to recreate the scripts they use to train their donation cold-callers.

Taxing Grad School Endowments

Of course, many of those donations are small potatoes. They add up to bigger potatoes. But universities will absorb an even harder hit as the new tax bill goes after the biggest potato of them all: private endowments.

Many of the nation’s elite universities rely on large, private donations and endowments to remain elite. Thirty of America's top universities—including elite schools like Harvard, Princeton, Yale, MIT, Notre Dame, Stanford, etc.—would be impacted by a new tax, one that was never previously imposed on this kind of charitable giving. Under the new plan, any private university with endowments of $500,000 per student or more will now be required to pay a tax of 1.4% on those endowments.

For private institutes like Harvard and Yale, which use these endowments to fund some of the world’s best scholarships, research grants, learning facilities, and educational resources, the new taxation would cost hundreds of millions of dollars a year. This will have a direct impact on operational abilities and student opportunities, most particularly by raising already enormous tuition rates among America’s best schools.

Still, the exact impact remains nearly impossible to quantify at the moment. Says Karin Johns, director of tax policy for the National Association of Independent Colleges and Universities, the IRS is still working on the “very complicated formula” that will determine which endowments can be taxed and which can’t.

Either ways, she points out that this is not a fiscal decision. She acknowledges that “it’s really just more of a punishment because they don’t like our sector.”

It also creates a troubling precedent. As far as the public is concerned, endowments for nonprofits have always been a protected commodity. This seemingly modest change in policy could be the beginning of a major sea change in how the US government treats nonprofit institutions. Indeed, if this particular initiative is an act of vengeance against a sector that the GOP neither likes philosophically nor needs electorally, it also forces the question: what other endowments and nonprofits might be targeted for political purposes?

Now that the slippery slope has been lubricated, how might taxation be used to slice into endowments or cripple operations for nonprofits whose objectives run contrary to the majority party in Congress and the White House?

Repealing Obamacare’s Individual Mandate

This one actually stands to have the single biggest impact on Millennials. The Trump Administration failed several times to repeal Obamacare legislatively. Instead, the GOP authored a change into the new tax bill that removes the tax penalty for individuals without healthcare coverage. This is expected to be a devastating blow for the Affordable Care Act and the national healthcare marketplace. The marketplace cut the number of uninsured Americans between the ages of 18 to 34 in half between 2010 and 2015.

According to the Congressional Budget Office, four million fewer people will have coverage in the first year of the mandate repeal. The number is expected to rise to 13 million by 2027.

Millenials and recent college graduates—many of whom tend to land entry-level jobs that don’t provide full employee benefits or competitive medical insurance—will be among those most immediately impacted by this change. While not specific to college students, this is one element of the new tax bill that simply cannot be overlooked if you are in a demographic likely to be effected by diminished access to affordable marketplace insurance.

It Could Have Been Worse … It Still Might Be, Actually

More disconcerting than what the tax bill ultimately included is what it intended to include. The process of reconciliation—in which the House of Representatives and the Senate negotiate select items in order to reach compromise between two versions of a bill—ultimately produced the final version to this tax bill.

Scrapped from this final version were two key provisions that would have had a direct and harsh impact on graduate students.

The version of the tax bill approved by the House of Representatives generally comported with the most conservative extremes of the legislative body. Its version of the bill would have:

These changes would have been impactful for students across the boards (in 2012, seventy-one percent of students graduated with debt) but would have been especially devastating for graduate students. As for the first provision, students earning tuition waivers (while typically also fulfilling teaching responsibilities), would have been required to pay taxes on what is essentially poverty-level income. The latter provision would take the remarkable step of actually increasing the student loan repayment burden on a postgraduate population that all evidence suggests is struggling to get out from behind the 8-ball.

As the tax vote approached, graduate students launched a massive and organized letter-writing and social media campaign aimed at voicing their objections with legislators. An article in the Atlantic points out that recent attacks on graduate students from the highest levels of government have created a new and unlikely group of campus protestors. Historically, graduate students have remained above the fray while undergraduates organize on-campus war protests, occupy movements and other social justice demonstrations.

But the recent acts and overtures by the GOP make it impossible for graduate students to stay on the sidelines. These are provisions that will impact the most ambitious students first. The monetary implications mean that most grad students literally can’t afford to stay out of this fight.

Their lobbying efforts here were met with success, or at least with a temporary reprieve. The two provisions cited in this section didn’t make it to the final version of the tax bill. But it hardly means they are off the proverbial table. The tax bill had much bigger fish to fry (namely an absolutely staggering cut in corporate taxes, from 35% to 21%).

However, for the entire higher education sector, the warning shots have been fired.

Fiscal Contradiction and the Skilled Labor Shortage

There is a serious internal contradiction to the Trump tax bill, which proposes invigorating the US economy by giving corporations the spending power to create more jobs and raise wages. While there is literally zero empirical, historical, or even anecdotal evidence to suggest a corporate tax cut ever has or ever will lead to more and better paying jobs, there is plenty of evidence that an educated workforce is critical to an American economy struggling—not to create—but to staff high-skill positions. This tax bill—and the general push to marginalize grad schools and their students—will only heighten the need for corporations to look outside of the US for skilled workers.

According to a survey of construction companies conducted by the Associated General Contractors of America, seventy-three percent of businesses said that they had a difficult time finding qualified employees. Of those surveyed, fifty-five percent identified worker shortages as a top concern, whereas forty-one percent pointed to federal regulations and 18%, to low infrastructure investment.

This pattern presents a real and growing danger to America’s economic, technological, and scientific competitiveness. This danger is only magnified as we obstruct paths to success for those with the qualifications and drive.

And yet, the mission of creating skilled workers through postgraduate education is increasingly at odds with an ever-more mercurial conservative philosophy. To the point, the New York Times reported a Pew Research Center poll in which fifty-eight percent of Republicans and conservative-leaning independents said that colleges and universities had a negative effect on the US This number was just thirty-seven percent two years ago—notably just before Donald Trump ignited a wave of populist support from non-college-educated voters.

Justin Draeger, president of the National Association of Student Financial Aid Administrators, observes “there’s a general assault on higher education right now. I think it’s tied into a dangerous narrative in our country about elitism. It undervalues our most important resource, which is our inventiveness, our ingenuity, our ability to solve big problems. A lot of that work happens at graduate-level education.”

By taking what USA Today (hardly a liberal muckraker) calls a “get even” approach to legislating, the GOP has placed America’s young and educated in its crosshairs. If the tax bill was just the shooter firing warning shots, 2018 will see him firing real bullets.

What’s Next?

In a lot of ways, the dimensions of this tax bill relating to higher education are a mere preview of what’s to come. For Trump and a GOP Congress desperate for a single major legislative accomplishment in 2017, passing the tax bill in any form was a great deal more important than sticking it directly to every one of the president’s enemies.

But it places a target on this demographic, one that will be fired upon repeatedly as the House of Representatives works to move forward with its foreboding proposal to rewrite the Higher Education Act.

In late 2017, and lost amid the clattering political noise of the tax bill, was Representative Virginia Foxx’s (R–N.C.) proposal to deconstruct a legislative regime with significant and far-reaching implications for college and graduate students. In December, her proposal cleared the House Committee on Education and the Workforce.

Among its apparent aims are:

Graduate students mounted a massive grassroots effort to prevent inclusion of certain provisions in the final GOP tax bill. And for now, this effort has been successful (although it’s likely this was simply an easy point of reconciliation with a Senate bill that included no such provisions. Again, anything to get the tax break passed before vacation).

But now, with Congress recently back from holiday break, the grad school skirmishes surrounding the tax bill will ultimately be mere foreshadowing. For college and graduate students, the real war is yet to come.

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