President Monaco sent the following letter to the members of the Massachusetts Congressional delegation regarding the U.S. House and Senate versions of the Tax Cut and Jobs Act.
I am writing to express the concerns of Tufts University over provisions included in both House and Senate versions of the Tax Cut and Jobs Act. The legislation includes several proposals that would negatively impact our students, employees and our institution, ultimately making college less affordable, discouraging participation in higher education, and decreasing U.S. competitiveness globally.
I am deeply concerned that the House bill would eliminate Section 117(d)(5), which allows universities to provide tax-free tuition waivers for graduate students who teach and conduct research as part of their academic programs. This would have a devastating impact on our graduate teaching and research assistants as it would increase a student’s income tax by as much as $10,000 per year. According to data from the Department of Education, 60 percent of tuition reductions went to graduate students in STEM programs. Repeal of this provision would create a new tax and place an overwhelming burden on graduate students. Withdrawing support from this talent development pipeline will have negative consequences on our nation’s workforce in a time of increasing global competitiveness.
Tufts employees would be impacted by the House bill as it would eliminate Section 117(d) that enables our employees to defray the cost of education. According to a 2017 survey of nearly 300 institutions by the College and University Professional Association for Human Resources, 50 percent of employees receiving tuition reductions under Section 117(d) for themselves or family members earned $50,000 or less, and 78 percent earned $75,000 or less. This provision is a valuable benefit as it enables these families and their dependents access to higher education.
Section 127 is an important provision in the tax code that incentivizes employers to provide tax-free tuition reimbursement to employees up to $5,250 per year. This benefit encourages employers to support education and training of employees, which helps keep the U.S. workforce globally competitive. The proposal to eliminate this provision would likely result in less participation in higher education and skill development by our nation’s workforce. In academic year 2016-17, this provision provided over 100 employees of Tufts with tax-free reimbursements while pursuing learning opportunities at other universities. It also benefited students from other employers who were reimbursed when they access educational programs at Tufts.
Tufts is also concerned that current proposals to increase the standard deduction threshold will have a significant impact on charitable giving. The Joint Committee on Taxation (JCT) has estimated that the House bill would reduce the total number of charitable contributions deducted in 2018 by nearly $100 billion. Additionally, JCT estimates that the number of taxpayers claiming the charitable deduction will drop from roughly 40 million to 9 million. These charitable donations are an important source of Tuft’s operating revenue, supporting student scholarships, professorships, academic programs, research, and other important initiatives. The current proposals would negatively impact charitable giving, reducing the financial resources available to provide vital support for students and faculty.
Current proposals would subject private colleges and universities with more than 500 students and with endowments that have a value of more than $250,000 per student to a 1.4 percent excise tax on investment income. University endowments fund students through scholarships, services, academic programs, as well as scientific research and patient care. At Tufts, about 10% of the annual budget is supported by distributions from the endowment which is used for scholarships, fellowships and support for academic programs. Taxing endowments would adversely impact the financial resources available from the endowment, reducing support for important programs and scholarships. While Tufts would not currently be subject to the tax, this proposal establishes a precedent that would be very detrimental to higher education and which may one day impact Tufts University.
Private Activity Bonds
The bills also eliminate private activity bonds, which are used by colleges and universities to finance capital projects. This proposal will result in higher borrowing costs, leading to diminished investments in infrastructure, fewer jobs, reduced public services, and increased service charges and other fees. Tufts has used private activity bonds for critical investments such as maintaining and repairing medical, engineering and dental research laboratories; supporting deferred maintenance projects; and investing in technology to create more efficient academic and learning environments.
It is estimated that these and other changes, including the elimination of deductions for tuition and related expenses and student loan interest, would increase the cost to students attending college nationally by more than $65 billion between 2018 and 2027. These changes will burden students and families by increasing the cost of higher education; at a time when lawmakers, the public, and colleges themselves are focused on lowering college costs.
We support that the goals of tax reform are to aid the middle class and spur economic development. However, these proposed provisions run counter to those goals by making higher education more expensive for working and middle-class students and families and harming our nation’s research enterprise that fuels innovation. If the U.S. wants to remain the global leader of high-tech talent and continue to enhance our economic well-being, our tax policies should encourage the pursuit of postsecondary education and support our basic research enterprise.