Education Has Been “Dumbed-Down” in Tax Reform

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Abstract

President Trump has touted tax reform as a major benefit to “middle-class” Americans. Defining the middle class is difficult, but, according to the U.S. Department of Commerce, middle-class Americans have common aspirations for themselves and their children – they want “economic stability and therefore desire to own a home and save for retirement. They want economic opportunities for their children and therefore want to provide them with a college education.” Middle class families believe that college will create future economic opportunities for their children, so they plan and save for college educations for those children. Currently, parents have several avenues to help with giving their children a college education, including savings plans such as Code Section 529 plans and Coverdale savings plans, Educational credits and tuition deductions, and of course, scholarships from educational institutions.
The initial version of the “Tax Cuts and Jobs Act” passed by the House of Representatives, disseminated many of the provisions that help middle class families provide their children with a college education. According to an analysis prepared by the nonpartisan Joint Committee on Taxation, those changes were expected to increase the cost of college education by $71 billion over the next decade. Fortunately, most of these provisions were not included in the final version of the tax law; even so, the costs to higher education will likely exceed amounts projected, as addressed in this paper. Further, this paper will also address the education incentives that were initially included in the House bill, but not the final version of the tax law, as they are likely targets for future tax legislation.

Authors

• Melanie McCoskey, University of Akron

• Doron Narotzki, University of Akron