President Schill on impact of tax reform bills

Dear colleagues and friends,

For those of us in higher education, the period between Thanksgiving and New Year’s Day is about completing research projects, taking and grading exams, and planning for the winter term. This year, however, we should all be concerned with something going on thousands of miles away in Washington, DC—namely, tax reform efforts being considered by Congress. Simply put, many of the legislative proposals could substantially impede the ability of universities such as the University of Oregon to deliver an excellent, affordable education to our students.

Graduate students have the most to lose under this legislation. About 1,500 graduate students at the UO currently receive full or partial tuition remissions plus stipends. This financial support is vital in enabling them to afford years of graduate education without amassing huge debts. In return for this assistance and as part of their training, graduate students help support faculty research and teach undergraduate courses in the humanities, social sciences, STEM fields, and beyond. Tuition waivers or remissions to graduate students are not now taxable; this would change under the tax bill passed by the House of Representatives. Undergraduates would not be spared from unfavorable treatment. The bill also undermines the practice of lifelong learning by doing away with the lifelong learning credit that provides access to a diverse group of students, particularly nontraditional students. The House bill also proposes ending provisions that permit the deductibility of interest on student debt and the exclusion of the value of tuition waivers provided to university employees and/or their family members enrolled at Oregon universities.

The targeting of undergraduate and graduate students in the push for tax reform is the most damaging element of the legislation from the perspective of universities, but there is more. Under the bills being considered by both the House and the Senate, the standard deduction would be increased substantially and the estate tax would be eliminated. On the one hand, increasing the standard deduction—the amount that taxpayers get to deduct from their taxable income before applying their tax rate—sounds like good news. Proponents argue it will simplify and potentially lower taxes for millions and millions of Americans. Detractors dispute those benefits.

The problem is that universities increasingly rely upon charitable gifts from alumni and friends to support their operations. This is especially important at universities such as the UO, where state support accounts for roughly 8 percent of our total university budget. In the United States, the tax system provides an incentive for charitable giving by allowing donors to deduct from their taxable income the value of their gifts. But only people who itemize their deductions qualify for the charitable giving incentive. So, as more and more people choose the standard deduction in lieu of itemization, the incentive for charitable giving will go down, potentially costing universities across the nation billions of dollars a year. In a similar manner, the existence of an estate tax provides an incentive for people to give away money to charities like universities. Eliminating the estate tax would remove or reduce this incentive.

An additional provision in the tax law targeting private universities is a 1.4 percent excise tax on endowments of more than $250,000 per student. This provision will not affect the UO because of its status as a public institution. Nevertheless, the precedent of taxing university endowments is one that should give us all pause. It could easily be extended in the future to public universities and to schools with smaller endowments.

Why is Congress doing this? One explanation is that, in an effort to reduce the maximum corporate income tax rate from 35 percent to 20 percent while not ballooning the budget deficit, lawmakers are simply digging into all of the crevices of our nation’s metaphorical fiscal sofa looking for as much money as possible. After all, these bills also eliminate the deduction of state and local taxes and reduce the home mortgage interest deduction, two of the most popular tax breaks in the Internal Revenue Code. But, as recent articles in the media suggest, some see elements in the tax reform act as an assault on higher education.

I will leave it for our political scientists to speculate why some members of Congress apparently have chosen to target higher education. Here is what I am doing—and what I suggest that you, as students and members of the faculty and staff, can do. First, the University of Oregon is an active participant in the American Association of Universities and the Association of Public and Land-Grant Universities, and both organizations are actively lobbying Congress to restore the exclusions for graduation tuition waivers and employee tuition benefits as well as the deductibility of student loan interest. They are also arguing that the charitable giving deduction be universal—meaning that it be available to everyone in addition to the standard deduction. We support these efforts.

In addition, members of our governmental affairs staff and I have been meeting with our congressional delegation to let them know the impact of the current proposals on the UO and to urge them to vote against or modify them. If that is something that interests you, more information is available at the American Council on Education website, including a portal to take action with Congress. While the House has already voted on its version of tax reform, the debate continues with the Senate taking a different approach.

Regardless of whether we succeed or fail in stopping elements in the tax reform legislation that negatively affect universities, it is clear that all of us—administrators, staff, students, faculty, alumni, and supporters—need to make the case that higher education in the United States should be cherished and nurtured, not targeted for cuts. Members of Congress and our state legislatures need to rededicate themselves to the idea that affordable higher education is more than a political slogan—it is a priority that needs to be supported with tax dollars. As the son of two parents who did not go to college, I experienced the transformational effect of higher education, and we need to make sure that that door is open to everyone who can benefit from passing through it. Expanding the Federal Pell Grant program, defending the security of DACA students, and expanding rather than reducing tuition support is a necessary component of that effort.

We also need to make the case for graduate education. Our graduate students will complete their education at the UO and go off to careers in academia, the professions, and industry. The research they do here and the work they will do in the future will advance knowledge, fuel the economy, and enlighten generations to come. Our nation eats its own seed corn by reducing our support for them by taxing their tuition waivers.

Sincerely,
Michael H. Schill
President and Professor of Law

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12 Responses to President Schill on impact of tax reform bills

  1. just different says:

    This is where “graduate employees receive free tuition” gets you. Why not just be honest about the fact that grad students are really apprentice academics and dispense with the entire fiction that the tuition waiver has any independent value?

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    • Anonymous says:

      1. Science professors frequently pay graduate student tuitions out of their NIH and NSF grants. If we dispensed with the idea that this tuition has a value, we would not be able to take that money. I’m not saying that the current system is necessarily the best one, but it is the standard one at US universities, and if we change it, then we have to find a way to make up for that lost revenue.

      2. Not all grad students are apprentice academics! For example, we have a lot of professional programs at our university. If you do away with tuition for, say, a graduate English class, how about for a class in the Ed School? It’s difficult to put different price tags on graduate credits from different departments.

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      • just different says:

        Your point 1 actually underscores that tuition waivers are not really benefits paid to grad students. And point 2 is a straw man, since professional students generally do not get tuition waivers in the same sense that academic students do.

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  2. honest Uncle Bernie says:

    The changes in tax policy on higher ed in the proposed tax reform are an attack on higher education. The proposed taxes on tuition waivers are a vicious attack on students seeking to attain advanced degrees. The Republicans have turned against higher education, especially elite higher ed. In this, in my opinion, they are vandalizing the country. Not the way to Make America Great Again! Somebody needs to get in touch with Ivanka …..

    That said, all of this was perfectly predictable, in fact, I have predicted it, though not these specifics, which frankly go beyond what I expected. But higher education has been asking for it for a good long time. I will mention just the astonishing political imbalance that has overtaken higher ed, the hostility to conservative scholars, the sometimes violent attacks on conservative speakers, the manifest contempt for persons with dissenting views … I will not go on and on, e.g. about the degradation of large parts of the curriculum — I will just say that the current reaction was INEVITABLE. The chickens are coming home to roost, as we used to say back on the farm (and as was said by many on the left back in the 60’s.) The chickens are coming home to roost.

    I hope the Republicans will back off, but I don’t count on it. Hope academia will come to its senses. Not counting on it.

    By the way, UO has become somewhat prominent as an exemplar of what has gone wrong with higher ed (from the point of view of the Republicans and the right). Not in the first tier with Mizzou, Yale, Middlebury, etc. but a prominent second stringer with the speech codes, Bias Response Teams, blackface business ….

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    • just different says:

      I think you’re giving the House GOP way too much credit. I doubt very much that they even knew how funding for scientific research works, let alone the damage that taxing tuition waivers will do.

      A certain branch of the right have been hostile to higher ed for decades, and they’ve gradually put themselves in charge of government. Don’t try to blame “political correctness” for the stupidity, ignorance, and shortsightedness of House Republicans. They’re very capable of being idiots all on their own.

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    • Focused anger cuts says:

      The right has been attacking the academy ever since students on some professors mobilized in the 60s and 70s make campuses more than finishing schools for the governing and corporate elite. Many conservatives have made careers of this attack, cashing checks from Coors, Mellon, and Kochs.

      This is not new. There is no great insight in “predicting” it. It has little to nothing to do with bias codes or other recent developments, apart from providing a ready excuse to pursue attacks motivated by other factors.

      GOPers and the right believe education should be about, only about, networking for elites and glorified job-training for the masses.

      Any notion of critical education or engagement with the world or empowering citizens is anathema to rightists, always has been, always will be.

      Finally, the idea that campuses in the aggregate are hostile to conservatives is pure bullshit, a signature achievement of the ideological offensive by the right since the crisis spawned by student and faculty activism in the 60s and 70s.

      Anecdotes? Sure. Incidents? Sure. Pervasive, systematic policy to exclude conservatives? Pure bullshit.

      Now, can we talk about how every other major institution in society systematically suppresses left-wing political expression? That is, even if conservatives were attacked on campus, that would be OK because it is the one place in the country not dominated totally by right-wing ideology or milquetoast liberalism.

      Don’t believe? Then bring up socialism or transphobia at your next corporate retreat.

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      • Fishwrapper says:

        Going after academics predates the 1960’s; it may have peaked with the large protests and antiwar activities of the 60’s and 70’s, but the roots of the conflict between conservative politicians and “ivory tower elitists” that we see today has its roots further back, in the original socialist revolutionary age of a century ago. The attacks on academe from an ideological perspective as we see it today becomes more codified and institutionalized right at the beginning of the Cold War.

        In New Hampshire, for example, in 1951, the New Hampshire General Court passed the Subversive Activities Act, which resulted in the 1957 Sweezy v. NH US Supreme Court decision, in which a 6-2 majority declared, “Teachers and students must always remain free to inquire, to study and to evaluate, to gain new maturity and understanding; otherwise our civilization will stagnate and die.”

        One can draw a direct line between Gwynne Daggett’s struggle with Granite State blinkered thinking and the current climate promoted by those in charge…

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        • Focused anger cuts says:

          Fishwrapper, without a doubt it predates the 60s, however the number of academic radicals to attack was minimal until two conditions occurred: 1) the massive expansion of higher education after the war; new and enlarged institutions; enormous surge in students; surge in number of faculty; 2) the development of a much larger number of radical faculty and students and their (relative) mobilization during the 60s and 70s creating a “crisis of democracy” that invited the sustained counter-attack by the right beginning in the 70s. This is when a wave of Coors and Mellon and Scaife and Olin money produced new institutions with the mission to corral, contain, and then neuter campus radicalism, as well as radicalism elsewhere.

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          • Fishwrapper says:

            I’ll agree that the boomer expansion of higher ed amplified the scope of attacks on the liberals in higher ed. But a large amount of the groundwork of conservative ideology towards higher ed liberalism was laid long before the boomers filled out their applications. By the time Buckley published God and Man at Yale in 1951, the notion that higher education was somehow indoctrinating youth in – gasp – liberalism had already taken quite a strong, and long, hold.

            A “sustained counter-attack by the right beginning in the 70s” ignores the sustained counter-attack on radical faculty and students begun decades prior, and even the notion of Liberal Arts as a back door to liberalism away from science over a century ago.

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      • Dog says:

        UH, what’s a corporate retreat?

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        • Fishwrapper says:

          Bad catering at an offsite mandatory meeting.

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          • Fishwrapper says:

            And lots of buzzword bingo with shitty prizes.

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