May 17, 2019/Press

NEW REPORT: Tillis-Backed GOP Tax Bill Hikes Taxes on Low-Income UNC Students

Raleigh – Low income students at universities across the country, including the University of North Carolina, are being taxed as if “they are trust-fund babies” thanks to the GOP tax bill Senator Thom Tillis voted for in 2017, according to a breaking report from the New York Times. Around 14 percent of UNC’s undergraduate class is part of a program that provides financial aid packages to students who fall below 200 percent of the federal poverty level, packages that now face new taxes because of the Republican tax bill. “Those expenses are real,” [UNC associate provost Rachelle] Feldman told NYT. “Students need a place to live, they need food, they need toothpaste and toothbrushes. Anything that’s taxed from it is a stress.”

Senate Republicans, including Tillis, rushed through their sloppily written tax bill without understanding its far-reaching consequences. Recently, Gold Star families found “steep hikes” in their taxes because of the GOP bill. Now, middle- and low-income students are bracing for the same. What other unintended consequences await North Carolinians because Senator Tillis and Senate Republicans rushed through this bill?

IN CASE YOU MISSED IT

New York Times: Low-Income College Students Are Being Taxed Like Trust-Fund Babies
By Erica L. Green
May 17, 2019

Key Points:

  • A little-noticed provision in President Trump’s sprawling new tax law is treating middle- and low-income college students as if they are trust-fund babies, taxing sizable financial aid packages at a rate first established 33 years ago to prevent wealthy parents from funneling money to their children to lower their tax burdens.

 

  • Higher-education leaders are calling on Congress to fix the provision, which drastically raised the tax rate on so-called unearned income for children with assets and young adults in school. Students with large financial aid packages are finding their nontuition assistance for items such as room and board taxed by as much as 37 percent, even if their family income tax rates are much lower.

 

  • The so-called kiddie tax rate was established specifically to address generational transfers used by rich parents to lower their tax burdens, but in the name of tax-code simplification, the Republican tax law expanded its reach. It is now hitting tribal funds dispensed to Native American children and young adults, and the families of service members who died in combat, some of whom saw hefty tax bills for their children’s survivor benefits this past spring.

 

  • The kiddie tax expansion appears to be one of several unintended consequences of a tax law that Republicans rushed through Congress in less than two months — and a byproduct of conservatives’ desire to simplify the tax code and bring in new revenues to help offset the fiscal cost of cutting tax rates for individuals and businesses.

 

  • Republicans now say they did not anticipate that it would raise taxes on low-income scholarship winners.

 

  • At the University of North Carolina at Chapel Hill, student aid officials said they had begun examining specific aid packages amid concerns about how the tax could affect its most needy students, said Rachelle Feldman, the university’s associate provost and director of scholarships and student aid.

 

  • About 14 percent of the university’s undergraduate class is part of a program called the Carolina Covenant, which provides debt-free, full financial aid packages to students who fall below 200 percent of the federal poverty level. That package includes nontuition room, board and living expenses that total about $13,402 in the university’s estimated cost of attendance next school year.

 

  • “Those expenses are real,” Ms. Feldman said. “Students need a place to live, they need food, they need toothpaste and toothbrushes. Anything that’s taxed from it is a stress.”
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