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The sweeping $1.5 trillion tax overhaul President Donald Trump signed into law last week will likely impact many areas of American life, including education.
Experts are still analyzing what the GOP tax plan means for each state, but it could affect everything from how parents pay for private schools to the amount of money available for public education. Here’s a look at how the tax overhaul might impact Florida schools — and some of the proposed changes that didn’t make it into the final bill.
1. A new way to pay private school tuition
For some families, the GOP tax plan will make it easier to pay private school tuition.
The tax-advantaged 529 accounts many families use to save for college — because earnings aren’t subject to federal income tax — can now be used to save for K-12 private school tuition as well.
Supporters are cheering the provision as a victory for the school choice movement, which supports non-traditional education options like charter schools and private school vouchers.
“It expands choice, it encourages families to save for education and it dramatically increases the flexibility on how families use 529 accounts,” said Thomas Carroll, the executive director of the #EdTaxCredit50 Coalition, a group pushing for the expansion of 529 accounts. “I just think it’s a tremendous opportunity for families to look at as an easier way to save money for the school of their choice.”
Any time you can help a family out by putting a few more dollars into the family account, I think that’s a very positive thing for our country.
Ralph Arza, director of government relations for the Florida Charter School Alliance
Ralph Arza, a former Florida legislator and the director of government relations for the Florida Charter School Alliance, said the tax legislation empowers parents to pick the best education option for their child.
“Children are expensive,” he said. “Any time you can help a family out by putting a few more dollars into the family account, I think that’s a very positive thing for our country.”
But critics argue that the provision will primarily aid wealthy families because low- and middle-income parents — who might already struggle to save for college — likely don’t have extra money to set aside for private school tuition.
The most recent report on 529 accounts from the Government Accountability Office found that parents who used the accounts in 2010 had roughly three times the median income of parents who didn’t and were twice as likely to have a college degree.
“I think it’s a great idea, but unfortunately the poor- to middle-income families are probably not going to take advantage of it,” said Joseph Jimenez, the owner of Trinity Christian Academy, a private school in Hialeah.
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The change applies to both new and existing 529 accounts, so families already using the accounts to save for college can start using them for K-12 tuition in 2018, Carroll said.
In Florida, the change will apply to the 529 savings plans administered by Florida Prepaid, but likely won’t have any impact on the prepaid plans families use to pay future college costs, said Terrie Ard, a spokesperson for the Florida Prepaid College Board. She added that the organization is still reviewing the final legislation.
2. Public schools could see a cut in funding
In some states, the biggest change in education could come as a result of the new caps on state and local tax deductions.
The final tax plan imposes a $10,000 limit on the amount of local property and income tax that can be deducted from federal tax bills. As a result, some families — especially in high-tax states — could end up paying more. Public school proponents worry that this could place added pressure on local governments to lower taxes, resulting in less funding for public education, which is funded primarily at the state and local levels.
The National Education Association teachers union estimates that the provision could put funding at risk for more than 130,000 education jobs nationwide.
The impact of the $10,000 cap will likely vary from state to state. In Florida, where there is no personal income tax, experts predict the change will have a smaller effect.
“It will only matter for Florida taxpayers who pay over $10,000 in combined state and local property and income taxes,” said Nora Gordon, a Georgetown University professor who studies school finance, in an e-mail. Data analyzed by Education Week show that 22 percent of Floridians took state and local tax deductions in 2015, with an average deduction of $7,373.
The impact will also depend on whether taxpayers take the standard deduction — which will almost double under the GOP tax plan — rather than taking state and local tax deductions. And it will depend on how local governments respond to possible pressure from residents to lower taxes.
But any potential decrease in revenue from property taxes — either as a result of pressure from taxpayers because of the new $10,000 cap on state and local tax deductions or because the higher standard deduction decreases the importance of mortgage interest and property tax deductions as incentives for homeownership — worries the teachers union. “Florida always ranks at the bottom for education spending,” said United Teachers of Dade president Karla Hernández-Mats. “Less property taxes for education means less funding and more cuts to an already vulnerable system that our legislature doesn’t properly invest in.”
For some proponents of the GOP tax plan, however, this a moot point. They argue that the tax overhaul will grow the economy, which would theoretically create a bigger tax base for federal, state and local governments.
3. Colleges could see a drop in donations
Because the tax plan almost doubles the standard deduction, taxpayers may have less of an incentive to itemize tax deductions including charitable contributions and, as a result, less of an incentive to donate money.
That could negatively impact colleges and universities, which often depend on donations from philanthropists and alumni to pay for the construction of new buildings, fund scholarships and cover other costs. Universities in South Florida have benefited from major donations in recent years, including a $20 million gift to Florida International University’s School of International and Public Affairs in 2015 and a $100 million gift to the University of Miami in 2016 for science and engineering programs, to name a few.
4. Graduate students won’t see a big change
Graduate students are breathing a sigh of relief after a provision that would have counted tuition waivers as taxable income was left out of the final bill. Doctoral students often get tuition waivers in exchange for teaching classes, so the provision would have increased the cost of graduate education.
Another controversial provision, in the House version of the tax bill, would have eliminated a tax deduction for up to $2,500 in student loan interest, creating a financial burden for taxpayers with significant student loan debt.
The provisions sparked widespread protests, including demonstrations in front of House Speaker Paul Ryan’s Capitol Hill office.
5. Teachers will keep tax cuts for school supplies
Teachers often spend hundreds of dollars on school supplies for their students and can deduct up to $250 on their federal taxes. The House version of the tax bill would have eliminated the tax break, while the Senate version would have doubled it to $500. In the end, the final version kept the $250 tax deduction for supplies.
Although it may not sound like a lot, for teachers already struggling to make ends meet the $250 tax credit provides some relief, teachers unions say. The preservation of the tax credit was among several “notable ‘improvements” to the final bill that resulted from educator advocacy, said Sharon Nesvig, the communications director for the Florida Education Association union, in an e-mail.