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Office of the President

November 14, 2017

Proposed tax bills would hurt students and economic competitiveness in Washington and the US

Ana Mari Cauce

This week, the U.S. House of Representatives is expected to consider and pass H.R. 1, the Tax Cut and Jobs Act. A similar bill is working its way through the Senate. Despite some differences between the House and Senate versions, the proposed legislation would come at great cost to students and the House bill would make it harder for graduate students, undergraduates and their families to pay for college – not just at the University of Washington, but throughout our state and the nation. When students lose out, it’s not only they who suffer, but all of us in Washington and beyond, from employers who need skilled employees to our communities that need productive citizens to propel our state, local and national economies forward.

The House version of the bill, in particular, would also eliminate the student-loan interest deduction, which provides real relief to students each year on their taxes. The proposal would also turn any tuition waiver given to graduate students into taxable income, which would affect approximately 7,000 students at the UW. Nationally, 60 percent of tuition reductions go to graduate students in STEM programs.

H.R. 1 would also eliminate IRS section 127, which allows all employers to offer up to $5,250 in educational assistance a year to employees. Since 1978, this provision has been one of the most effective tools available for employers to attract top talent and build a skilled workforce. It also helps to close the STEM-skills gap. UW proudly offers this benefit to all of its employees. In the 2016-2017 academic year, 691 UW employees used tuition waivers for $4.5 million tuition exemptions and another 751 employees used this funding at other institutions across Washington state, including WSU. These two provisions in the House bill would jeopardize our STEM pipeline at a time when we can least afford to do so as we compete in the global economy.

Both bills would also eliminate some tax-exempt bond options which could stunt the growth of public universities like the UW, limiting our ability to modernize research facilities and driving up costs. Under the current policy, the UW has had flexibility in refinancing debt in order to take advantage of lower interest rates – similar to refinancing a home mortgage. Since 2010, the University has saved $87 million in interest payments through this practice of advance refunding. These savings went to benefit students directly, in the form of housing and parking, and indirectly through lower administrative costs. The savings have also supported research, primarily at the UW Medicine facility at South Lake Union. Losing the ability to advance refund bonds would limit the UW’s ability to reduce its borrowing costs and use those savings to fund other vital projects.

The effective elimination of the Lifetime Learning Credit would also hurt students, especially those in community and technical college who are returning to school, in most cases, so they can better support their families

Across our nation, we need students from all income levels to know they have a viable path to enter college and earn a degree. The tax code is an important means of advancing that goal and we need policymakers to understand that cutting resources for students in the short-term will have negative, even dire, consequences for everyone in the long-term. Our global and economic competitiveness depends on producing more college graduates, but these bills fail to create the conditions to build this better future.

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