Tax bill to impact financial aid, donations
December 8, 2017
Currently, both the Senate and the House have passed versions of a revised tax code that would hit wealthy private colleges and universities with new taxes and restrictions. While there are significant differences between the Senate and House proposals, both would affect Bowdoin’s ability to, among other things, provide financial aid through a proposed tax on endowment earnings and a decrease in the number of taxpayers eligible to itemize charitable donations, which may disincentivize donating to the College.
The Senate proposal would raise the endowment threshold for colleges affected by the 1.4 percent excise tax on endowment earnings from $100,000 to $500,000 per student. Bowdoin is one of the 30 colleges affected in Senate version of the bill.
“What this tax does is penalize the 30 or so colleges and universities with a large endowment, virtually all of whom have very strong financial aid programs,” said President Clayton Rose. “It is bewildering to me that U.S. Congress would penalize those schools for doing the most to bring low- and middle-income students to great colleges and universities.”
Early Saturday morning, the bill passed in the Senate with a 51-49 vote. Senator Bob Corker from Tennessee was the only Republican to vote against the bill. Negotiators from the House and Senate will go to conference on Friday to work out the differences between the two bills, after which the House and Senate must vote on the joint version.
The proposal affects higher education on an institutional and individual level. The House version of the bill includes a tax on tuition waivers for graduate students and for children of university employees, which significantly increases the cost of graduate education and greatly affects colleges’ abilities to recruit talented faculty. The Senate version of this bill does not include this measure.
“In total, [the bill] will cause real hardship for institutions and for students that teach and support at these colleges,” said Rose.
Students expressed opinions on the bills, that ranged from support to concern.
Many students are concerned about the potential cuts to financial aid as well as possible future educational costs.
“A lot of Bowdoin students are planning on going to grad school, which, under the version of the bill that was passed in the House, would be significantly more expensive due to taxes on tuition credits and fellowships,” said Emma Kane ’18, co-leader of the Bowdoin Democrats, in an email to the Orient.
Isabella McCann ’19 is opposed to the bill and thinks it will radically affect all areas of American life.
“One of the things that I think is most upsetting about it is that it touches aspects of American life that have nothing to do with taxation,” said McCann, referring to aspects of the bill that would allow Arctic oil drilling and give more rights to fetuses.
Regarding the economics of the bill, McCann is concerned about adding $1.5 trillion to the deficit.
“They’re just propagating trickle-down economics again, which we’ve seen time and time again doesn’t work in this country,” said McCann.
“They are parroting these economic theories that have absolutely no basis in fact, based on the studies that have been done by congressional bodies,” she continued, referring to a study recently done by the Joint Committee on Taxation.
Francisco Navarro ’19, head of Bowdoin Republicans, is generally in favor of the bill—specifically the House bill—and believes that passing the bill would significantly boost the economy through the lowering of corporate taxes.
“We currently have the highest corporate tax rate in the world at 39 percent and it would lower that to 20 percent,” said Navarro. “That immediately boosts many aspects of the economy, like the stock market, and it will create many jobs.”
However, he expressed concern over the increased debt the tax reform would create.
“I do worry about the aspect that it will raise the debt. Fiscally, traditionally, conservatives don’t go for things that raise the debt, but this one does in the hopes that we achieve enough growth that it evens out,” said Navarro.
The House’s bill would also reduce the number of tax brackets from seven to four, which Navarro supports because it would simplify the tax code and generally lower the tax rate for every bracket.
Rose has been in contact with the congressional delegation from Maine, which includes Sens. Susan Collins and Angus King, as well Rep. Chellie Pingree. Rose declined to comment on these interactions.
Rose expressed that the congressional delegation is supportive of Bowdoin’s mission.
“They listen carefully, they ask good questions, and so we have an ability to be heard in a very thoughtful and real way,” said Rose.
However, many students are upset with Senator Collins’s vote in favor of the measure.
To protest Collins’s support of the bill, Bowdoin Climate Action, Bowdoin Democrats and Bowdoin Reproductive Justice Coalition are organizing a sit-in at Collins’s office in Portland. On Friday, a group will gather in Congress Square Park and then march to Collins’s office.
“We’re going to go to her office and tell her that she needs to find the courage that she summoned over the summer when she voted against the repeal of the Affordable Care Act and summon that again to vote against this bill,” said McCann.
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