By Erwin Chemerinsky
For The Sacramento Bee
As I read the Republican’s tax proposals, I kept thinking, “Have you no shame?” After years of lamenting the size of the federal deficit, the House version of the tax plan would increase the deficit by more than $1.7 trillion over the next 10 years. The proposed overhaul of the tax system is an unabashed effort to help Republican friends and hurt others in a way that would be unprecedented in American history.
In the face of growing wealth disparity, the Republicans plan will cut taxes for the very rich. For example, the bill will eliminate the estate tax, which will benefit those inheriting more than $5 million. Moreover, the richest families would get the biggest tax cuts in both dollar and percentage-of-income terms. Taxpayers in the top 1 percent would get half of all of the benefits of the tax cuts. More than 97 percent of those in the top 0.1 percent would see a tax cut due to the Trump plan — worth an average of $747,580.
I am especially concerned about the effects of the tax proposals on education. The Senate plan eliminates all deductions for state and local taxes, while the House proposal retains property tax deductions up to $10,000. There is no doubt that this is an attempt to hurt blue states which have higher taxes, like California, New York, Illinois and Massachusetts. This will put great pressure on these states to lower taxes, which undoubtedly will hurt spending on education that is such a large part of the budgets in these states.
The tax proposals go even further in targeting higher education. The House bill would eliminate the student loan interest deduction, which allows any individual with an income up to $80,000 to deduct up to $2,500 in student loan interest. In 2014, 12 million student loan borrowers benefited from this provision.
The Republicans also propose to tax the tuition waivers given to graduate students when they work as instructors and researchers. This will dramatically increase the cost of going to graduate school. It is estimated that 145,000 graduate students benefit from this, with 60 percent studying in the areas of science, technology and engineering. Many will not be able to afford graduate study.
The tax plan also includes a 1.4 percent excise tax on the investment income of many private colleges and universities. Colleges and universities will have to absorb these costs by increasing tuition, which will make higher education ever harder to afford, or by cutting the quality of their programs. The House version would eliminate tax breaks for nontraditional college students by eliminating the Lifetime Learning Credit and the American Opportunity Tax Credit. The bill also would abolish a provision that allows an employee to receive up to $5,500 in tax-free tuition assistance from his or her employee at the undergraduate or graduate level.
The House Ways and Means Committee’s summary of the legislation says that the bill would increase the cost to students of attending college by more than $65 billion in the next decade. Education remains the most powerful means for class mobility. At the University of California, over 40 percent of students are the first in their family to go to college. Like them, I am the first in my family to attend college and I could not have done so without a scholarship for my undergraduate studies and loans to pay for law school.
Why are Republicans so clearly targeting higher education in this way? A survey by Pew Research Center earlier this year reported that 58 percent of Republicans and Republican-leaning independents say colleges and universities have a negative effect on the way things are going in the country.
But harming higher education truly makes no sense for a country that wants to continue to be a leader in innovation and quality of life and wants to enhance social mobility. Indeed, the country should be doing exactly the opposite by investing more in higher education, which is what is happening in countries like China.
There is much good that can come from tax reform, but these proposals are not the way to do it.
Erwin Chemerinsky is dean and professor of law at the University of California Berkeley School Of Law. He can be reached at echemerinskylaw.berkeley.edu.