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Final Tax Bill Keeps Teacher Deduction at $250, Cuts State and Local Deductions

By Andrew Ujifusa — December 15, 2017 3 min read
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After extensive negotiations, a congressional conference committee has agreed to a final tax reform bill that could impact state and local funding and teachers’ pocketbooks, as well as school choice. The legislation still needs to be passed by both the House and Senate and be signed into law by President Donald Trump, who wants a tax bill to sign before Christmas. Here are a few key details we know about it:

State and Local Tax Deductions

The final legislation allow taxpayers to deduct up to $10,000 in either a combination of property and income taxes, or property and sales taxes. (See page 81 of the bill’s joint explanatory statement at the link above.) Both the bills previously passed by the House and Senate would have allowed people to deduct up to $10,000 in property taxes, but not income or sales taxes.

Reducing the amount of state and local taxes people can deduct could exert significant pressure on some states and communities to reduce their own taxes, and therefore reduce revenue available for funding for schools. We discussed this on a recent episode of Education Writers Association radio.

“We lost a policy fight. Our schools and students lose more,” said Noelle Ellerson Ng, the associate executive director of AASA, the School Superintendents Association, which along with other state and local groups sought to keep the current deductibility of state and local taxes.

Teacher Tax Deduction

The final bill also maintains the current $250 deduction teachers and principals can take for spending their own money on buying supplies for their classrooms. (See page 106 of the explanatory statement.) The legislation previously passed by the House would have eliminated the deduction entirely, while the Senate bill would have doubled it to $500.

The $250 deduction doesn’t necessarily have a huge impact on educators’ federal tax burden. But they see it as at least a symbolic recognition from Washington that, unlike many employees, they have to spend their own money to support their work. More on the teacher tax deduction is here. And more broadly, a joint congressional report on the bill also details the impact of new income tax brackets.

“Notwithstanding all the other terrible provisions in this bill there’s a little comfort in the fact that Congress did hear the outcry from educators and others when the House tried to eliminate this very small deduction that educators have been allowed to claim on their taxes,” said Marc Egan, the director of government relations for the National Education Association.

Otherwise, Egan called the bill “rotten to the core” and said the entire process behind the tax bill “pretty much a sham.”

More Savings for School Choice

The final GOP tax bill also allows current 529 college savings plans to be used for up to $10,000 in annual K-12 expenses, including private school tuition. (See page 63 of the explanatory statement.)

The proposal represents the first step by Congress to expand school choice since President Donald Trump and U.S. Secretary of Education Betsy DeVos—both big backers of parental choice—took office. It’s not a new school choice program per se, and some are concerned that it only helps wealthier people who can afford to use 529 savings plans, many of whom might already be sending their children to private schools.

“Is this a big giant school choice plan? I think this is good policy,” said Jonathan Butcher, a senior policy analyst at the Heritage Foundation, which backs private school choice. “So long as we have an extremely complicated tax code, if the choice is to do nothing, or give families more options—then I would opt for that.”

Other Details

The legislation would also put an end to qualified school construction bonds and Qualified Zone Academy Bonds.

The latter is important to the charter school community, which says the zone academy bonds help charter schools find facilities and amenities.

“The issue with charter school facilities is one of the biggest issues to charter school growth. They don’t have access to the same financing that traditional schools do,” said Christy Wolfe, a senior policy advisor for the National Alliance for Public Charter Schools.

Photo: President Donald Trump, flanked by Rep. Kevin Brady, R-Texas, left, and Sen. Orrin Hatch, R-Utah, right, speaks during a bicameral meeting with lawmakers working on the tax cuts in the Cabinet Room of the White House on Dec. 13. (Manuel Balce Ceneta/AP)

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Liana Loewus, Assistant Managing Editor and Arianna Prothero, Assistant Editor contributed to this article.