This post is for the teachers out there. Actually, no, it’s not just for the teachers. It’s for anyone whose kids go to school every day and learn from teachers, for anyone who ever was one of those kids, and for anyone who’s benefited from the fact that we live in a society where those kids eventually develop into productive adults. In other words, this post is for everyone. This is something I hope we’ll all care about.
Republicans finally unveiled their much anticipated “tax reform” bill this week. It’s deservedly gotten lots of coverage, so I’m not going to talk about it in depth on this blog. But there’s one small detail that you won’t hear about much, so I wanted to mention it here: The GOP tax bill will eliminate the “educator expense deduction” which currently allows teachers to take a deduction for money they spend buying supplies for their classroom.
This deduction is not big – teachers are only permitted to deduct up to $250 worth of expenses. But every little bit helps, especially for teachers, many of whom already don’t make nearly what they’re worth. One recent survey showed that in the 2015/2016 school year, teachers spent on average $600 of their own money on supplies for their classroom. And teachers in high poverty areas spent the most. But, economics aside, this deduction is a very small token of acknowledgement from the government of the sacrifices so many teachers make for their students. I mean, the fact that teachers are spending any of their own money on supplies for their classrooms is nuts. Yet we all just accept it as routine at this point.
Now backing up a bit, for those who are unfamiliar with the tax bill debate, the GOP tax bill would give enormous tax cuts to corporations and very large tax cuts to the very wealthy. It will also give much smaller tax cuts to most everyone else who currently pays income tax – though a fair number of middle class and upper middle class people will actually see tax increases (some estimates say up to a third will pay more in taxes).
The tax cuts come from reducing the income tax rates that are paid by corporations and individuals (along with getting rid of and/or reducing some various other taxes). But in order to keep the government from losing too much revenue due to these reduced rates, the GOP plan eliminates a whole bunch of assorted deductions, credits & exemptions that currently exist in our tax system. (Even still, their plan will increase the deficit by $1.5 trillion over the next decade). The idea is that lowering the rates & getting rid of deductions makes our tax system simpler, though if you look at the overall structure of the GOP’s new plan, it’s arguable whether that’s really true.
In any case, the GOP had loads of choices to make with regards to which deductions, credits, and exemptions to limit or get rid of, and – like with the educator expense deduction – they ended up making all sorts of interesting choices that, on the surface, seem to have no rational policy underlying them. For example, their plan gets rid of the adoption credit, ends the medical expense deduction and ends the deduction for a damage done to your home by a flood. There are too many others to even name here, let alone discuss in depth.
But importantly, the GOP bill ends a bunch of deductions that currently help people with the expense of getting a college education. For example, the plan will end the deduction for student loan interest and end tax-free status for employer tuition reimbursements. And while some of that is made up for with new credits in the GOP plan, overall the plan eliminates about $65 billion in education tax breaks over the next 10 years.
And now, getting back to our teachers . . . It’s true, many of them could end up better off under this new tax plan, even with the loss of the small deduction for their classroom expenses. It’s impossible to do any kind of tally of how/whether teachers would benefit overall, because the situation will be so different for each individual, depending on their own salary, the salary of any spouse, how many children they have, where they live, and a bunch of other variables. One thing to note though, the tax savings actually get smaller after the first few years. And as noted above, for some, there will even be tax increases.
But however significantly teachers end up benefiting (or not) from any tax cuts, why can’t teachers have a tax cut, and also keep that small deduction for their out-of-pocket expenses? As I said earlier in this post, the GOP had choices to make with this bill. They didn’t get rid of all the deductions and credits in our current tax code. And this particular deduction is so small, getting rid of it barely makes a dent. On the other hand, during his presidential campaign, Donald Trump promised to close the “carried interest loophole,” which allows investment fund managers to pay the capital gains tax rate instead of the significantly higher income tax rate on their ordinary income. Getting rid of that loophole would bring in nearly $200 billion of revenue over ten years. But guess which loophole the GOP tax plan preserves?
And here are a couple other interesting choices the GOP made: 529 plans, which currently offer tax preferred status to help parents save money to pay for their kids’ college, will become available for K- 12 education under the new tax plan. Under the GOP bill, parents may use up to $10,000 per year out of their 529 for private school expenses. Obviously the upshot of this is to encourage private school enrollment, a longtime policy goal of Education Secretary Betsy DeVos.
Additionally, the bill uses language that explicitly allows parents to set up a 529 plan for their “unborn child” or “child in utero”:
Parents have long been able to set up 529 accounts for an unborn child, but the provision accomplishes what anti-abortion activists have long sought: It enshrines into federal law the recognition of the unborn.
And if it seems far-fetched that the use of those terms in the bill is a conscious choice intended to have legal import, here’s what Jean Mancini of the anti-abortion group March for Life said about Republicans including this provision in the bill:
A child in the womb is just as human as you or I yet, until now, the U.S. tax code has failed to acknowledge the unborn child.
So as you can see from the various choices outlined here, writing a tax plan is not just a complex task of balancing out rate cuts with revenue to replace it. A tax bill is not simply a mathematical problem. It is also a statement of beliefs and priorities. Therefore, we need to pay attention to just what the GOP is saying when they write a bill that – in addition to making it harder to access higher education – eliminates the small nod to our country’s educators in the form of the educator expense deduction.