Tax Reform: What Parents Need to Know About Proposals in Congress

UPDATE 12/4/17: On November 16^th, the House tax reform bill passed. On December 2^nd, the Senate bill passed. The amendments from Senators Hatch and Scott were not included in the final bill, but the Senate did include an amendment from Senator Cruz that will expand 529 savings plans, allowing the money to be spent on K-12 educational expenses, including tuition costs at private or religious schools. Next, a “conference committee” will meet to reconcile the two bills and put together a final piece of legislation to send to the President.

You may have seen headlines over the last few days about tax reform in Congress. The House and Senate have released their tax reform proposals and there has been an ongoing discussion about what this means for parents, families, schools, and students across the country.

What is the House proposing?

 First, let’s talk about the House’s proposed bill. The Tax Cuts and Jobs Act (H.R. 1) aims to lower taxes for Americans. For example, the House bill lowers the tax rate for low- and middle-income families and increases their deductions. It also increases the child tax credit from $1,000 to $1,600. On the surface, these may seem like good things for many families.

But what is not making headlines is the trade-off we’ll have to make down the road if this tax proposal passes.  While families might see their tax rate lowered now, it could have a harmful effect on programs they rely on in the future.

In the long run, lower taxes means less revenue for the government. The House proposal would actually add at least $1.5 trillion to the national deficit. This means the government will have at minimum, $1.5 trillion less to pay its debts or operate programs.

So how will the government make up that lost money? By cutting $1.5 trillion from spending. The first programs to get cut will be the ones that students and families desperately rely on, like public education and Medicaid.  Medicaid currently provides schools with $4 billion in reimbursements for early screening and special education-related medical services, including for services from nurses, psychologists, counselors, therapists, and other professionals. In the last few months, Congress has tried to cut billions from Medicaid three times as part of its healthcare reform efforts and we have fought incredibly hard as a community to save it. If the House passes this tax reform package, it will be another opportunity to drastically reduce funding and attack Medicaid. Cutting programs like Medicaid to offset the increased deficit as a result of tax reform would be devastating to our schools and students. And ultimately, your child could lose access to services they rely on in school and in the community.

What is the Senate proposing?

At the same time as the House is voting on the Tax Cuts and Jobs Act, the Senate is working on their own version of the bill, which has some big differences.  One of the biggest differences is the Senate version includes a repeal of part of the Affordable Care Act (ACA). In order to make up for the huge deficit the tax reform will surely bring, the Senate is proposing to repeal the individual mandate under the ACA. Though it’s not as harmful as previous efforts to repeal the ACA, this change could result in many individuals losing access to health care and increasing the number who rely on Medicaid, putting additional pressure on an incredibly important program for our students and schools.

In addition, two amendments to the Senate bill have been proposed that are concerning to us: (1) Senator Hatch’s Amendment #4 would allow a tax deduction for tuition and other expenses related to religious education; and (2) Senator Scott’s Amendment #3 would provide a deduction for corporate and individual contributions to “scholarship” awarding non-profit organizations. NCLD is seriously concerned about these amendments, which create federal voucher-type programs that will provide tax incentives for wealthy families to send their children to private and religious schools and will divert public funds to pay for private school tuition. For more on why NCLD opposes voucher programs, be sure to read through our newly released materials and learn about the implications of vouchers for students with disabilities.

While the tax reform conversation is much larger than just these few issues, it has big implications for our students.  NCLD sent a letter to Members of the House of Representatives and one to the Senate outlining these concerns. We will continue to work with Congress to ensure a sensible tax plan that doesn’t threaten our children’s education is passed.