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exploring how the world works and why it works that way …

taxing tuition bennies

with 3 comments

Penny wise and pound foolish.

That’s the federal government’s attitude toward helping people pay for college so we’ll have a more educated citizenry at a time when more people need to make more decisions on more information just to get through their daily lives.

Instead of enhancing educational opportunity, some in government want to make tuition a federal cash cow.

Congress’ Joint Committee on Taxation wants to tax tuition benefits given to employees of universities and colleges. (Disclosure: I’m an employee of a university.)

Here’s how that works:

Say you’re a professor (or a secretary or an administrator or a guy who works in maintenance). Generally you or your children may attend the college you work for without paying tuition. That’s a perk, and a nice one at that.

Educators want to keep it because, I’d argue, most educators (and other non-tenured college employees, like that guy in maintenance) don’t make a helluva lot of money teaching the nation’s children.

But the Joint Committee on Taxation says that’s unfair because it’s a perk that only “a limited group of taxpayers” has access to.

So the committee wants to tax those benefits. Now, follow the chain of events should that happen. University employees will want their institutions to raise their salaries to cover that added tax cost. Colleges and universities, under financial pressure to stop raising tuition (now at more than twice the rate of inflation), will be unlikely to do so.

So committed educators (and their necessary support staff) leave colleges and universities in droves. So what will be the impact on the education of the college students? Not so good.

Why does the federal government want to do this? To do what it always does: Get more money out of the governed. In this case, the feds argue that taxing this tuition benefit would raise $1.9 billion (yes, that’s with a B) over 10 years.

That money (seems like a lot, doesn’t it?) would pay for only 10 days of the American incursion into Iraq, where we’re dropping more than $200 million a day with no end in sight, elections notwithstanding.

Is that outcome (raising enough money over 10 years to fund a war for less than two weeks) worth the not-so-good impact on teaching the nation’s children?

Hardly.

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Written by Dr. Denny Wilkins

February 1, 2005 at 2:40 pm

Posted in Uncategorized

3 Responses

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  1. Don’t agree with that one
    have never responded to any of these blogs before but I thought I might offer an opinion to this one.
    Now, I understand that as a teacher you would not want to give up a perk, not a perk as nice as not having to pay tuition for your child to attend the school that you teach at. I really think that is a great benefit and one that is well deserved. I really think most teachers, educators to our children, work very hard as do the administrators and everybody else that is necessary to keep a school up and running. I also think that teachers do not have a lot of take home money, in your pocket cash, at the end of the day. I agree with all that, I have a lot of teachers as clients and friends.
    What I don’t agree with is that they should not have to pay tax on that perk. You have to pay tax on any gift or perk that you receive from any other job whether it is profit sharing or a gift for being a top dog, a top producer, whatever it is. These people work just as hard or even harder than some teachers. Let me use my company as an example. We get something called award perqs, which is more or less just like getting points for using your credit card. When you get enough perqs you can purchase something. Well, when you receive these perqs you are taxed so I get to buy something for x number of perqs and that is taxed as ordinary income at whatever the fair market value of the item is. That seems fair that I get taxed because I was given something instead of income. Now I don’t teach children but why is it ok to tax a gift to me and not a gift to you?
    I mentioned that teachers don’t have a lot of take home money, in your pocket cash. I want to point out something that a lot of teachers don’t want to hear, YOU DON’T HAVE IT THAT BAD! Most teachers get their health benefits for free and have a matching retirement plan. I don’t know a single teacher that has retired poor either. Hearing teachers cry poor mouth is getting a little old. The only group that has better benefits than teachers do are government employees but now that I think about it, most of them don’t have it so good. How many people do you know that still have a pension? How many people do you know that still have matching retirement plans or free health insurance? How many people do you know that get special financing to buy homes or special discounts? Let’s be honest, you may know a few people that get these things but most don’t! I find it hard to believe that teachers are going to walk over this tax.
    If I have to pay taxes there is no reason why you shouldn’t have to as well!

    Anonymous

    February 1, 2005 at 11:29 pm

    • Re: Don’t agree with that one
      I haven’t met a teacher yet that gets free health benefits. The pension that most teachers get is in lieu of Social Security, not in addition to it, and teachers generally don’t have access to 401k plans. The teachers I know who didn’t retire poor didn’t because thier spouses worked in business and the combined Social Security, 401k, and teacher pension was enough to let them live comfortably, or they “retired” and immediately went to work in the private sector to pay their “retirement” bills.
      My gut tells me you either a) don’t know many teachers, or b) have met only the .1% of teachers who qualify as truly lucky to have progressive, instead of regressive, school boards and strong community support for schools. 99.9% of teachers can’t live on a teacher’s salary in their communities without holding down second jobs or relying heavily on their significant-others or spouses. My wife, wife’s friends, sister-in-law, uncle, several more distant relatives, and at least one friend are involved in education around the country, so I have an intimate understanding of the issues with being a educator.
      Dr. Denny’s right – many professors and university employees will leave over this kind of tax. And similar taxes on primary and secondary school teachers would drive them out of the profession as well.

      angliss

      February 2, 2005 at 4:53 am

      • Re: Again I don’t agree with that one
        I don’t know a single teacher that does not have a 403(b) offered to them. I feel like I may have a pretty good understanding of how a teacher’s retirement plans work. No, I’m not related to any so I can’t say my wife, my sister’s crazy friend Bertha or anything like that. I can say that I do have a lot of friends that are teachers and even more that are clients and I do know for a fact that everyone of them has a 403 (b) offered to them and I do know for a fact that what they have offered to them instead of SS has a higher payout than SS. Please keep in mind that this was not intended to offend anybody.

        Anonymous

        February 9, 2005 at 6:56 pm


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