What A Tax Overhaul Could Mean For Students And Schools : NPR Ed The House and Senate are working to reconcile their versions of a tax plan, but one thing is certain: Big changes are ahead for the nation's schools and colleges.
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What A Tax Overhaul Could Mean For Students And Schools

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What A Tax Overhaul Could Mean For Students And Schools

What A Tax Overhaul Could Mean For Students And Schools

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STEVE INSKEEP, HOST:

Lawmakers are trying to reconcile two different versions of a tax bill, one passed by the House, the other by the Senate. They do seem to agree - Republicans, anyway - on two changes that affect America's schools. NPR's Cory Turner reports.

CORY TURNER, BYLINE: The first change has to do with something called a 529. That's a plan taxpayers can use to save money for college, where the earnings grow tax-free. Now Republicans want to let taxpayers use 529s to pay for K-12 tuition at private and religious schools. Now, families can already do that with a different plan, but that one has low contribution limits, and it isn't open to high-income Americans. This move would expand both.

NORA GORDON: I think the only taxpayers who will be in a position to benefit from the 529 change are very rich people.

TURNER: Nora Gordon is an economist and associate professor at Georgetown University. She says using these accounts to save for K-12 schooling won't help much unless you can afford to set aside a lot of money early on. When the Government Accountability Office studied these plans a few years ago, it found families who use them had about 25 times the median financial assets of those who don't.

While that change would help largely affluent parents who use private schools, change No. 2 could hurt funding for public schools. And this one is all about SALT - state and local taxes. Up to now, taxpayers who itemize their deductions - generally, high earners - have gotten a break from the federal government for paying state and local taxes. Think of it as a discount, courtesy of Washington, that ultimately helps state and local governments pay for important things like schools. Now Republicans want to limit or get rid of those discounts.

JOHN FRIEDMAN: This bill is going to make it more painful for residents to increase local property taxes to pay for public schools.

TURNER: John Friedman is an associate professor of economics at Brown University. He says, on average, nearly half of public schools' funding comes from local taxes, usually property taxes. In the past, when locals hiked property taxes to help pay for their schools, the federal government made it hurt less with that SALT deduction. But limit the deduction, and some voters and politicians might even call for tax cuts instead.

GORDON: This is a really big deal for some states and no deal at all for other states. And the states that it's a really big deal for are blue states.

TURNER: States like New York, Connecticut and New Jersey, says Georgetown's Nora Gordon.

GORDON: They are states with higher cost of living, higher property values and states that spend more on their state and local government.

TURNER: In addition to wanting to limit the deduction on local property taxes, Republicans in the House and Senate may also get rid of the deductions for state-level sales and income taxes, which are just as important to schools. Kim Rueben of the nonpartisan Tax Policy Center says states have been using these taxes to fund some of their poorest schools.

KIM RUEBEN: The money from the state ends up helping to prop up school districts that have less ability to raise money from the property tax.

TURNER: Getting rid of these discounts, Rueben says, will make state-level taxes more painful, and that could make voters less likely to approve new money for schools. And all of this is happening with many of America's public schools still reeling from the Great Recession. According to the Center on Budget and Policy Priorities, after adjusting for inflation, 29 states provided less overall state funding per student in 2015 than they did back in 2008.

Cory Turner, NPR News, Washington.

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