An Open Letter Regarding Tax Reform Proposals
On behalf of Denison University, I am writing to express concerns relating to provisions of the Tax Cut and Jobs Act proposal. We at Denison believe the proposed changes impacting higher education run counter to the goal of lawmakers, including those who may sponsor this bill, that American institutions of higher learning provide an affordable, world-class education to any qualified student.
This proposal will have a significant, negative impact on the entire higher education sector, which includes colleges large and small, with a variety of missions - community colleges, liberal arts colleges, and comprehensive research universities. Further, this proposal will specifically impede Denison’s pursuit of its mission to inspire and educate our students. Again, the proposal has wide-ranging proposed tax changes that would alter how students and families pay for college; eliminate workforce benefits; and increase college operating costs—at a time when lawmakers, the public, and colleges themselves are keenly focused on lowering education costs and student debt burdens.
First, the proposal includes provisions that eliminate the Student Loan Interest Deduction, which would make higher education more expensive for those who need to borrow to pay for college. Eliminating the Lifetime Learning Credit, which encourages employers to help students with their educational expenses, could dramatically increase an individual’s reported income, and hence the effective cost of education, for lower-income employees who benefit from employer-sponsored educational assistance.
Additionally, the legislation eliminates access to the municipal bond market for private colleges and universities, by ending the tax-exempt categorization of the interest that schools pay on debt. Many colleges, including Denison, require a sizeable physical campus to educate and house students, but find that tuition revenue is insufficient to pay for the renovation and maintenance of this infrastructure. Consequently, schools borrow to fund renovation of educational facilities, such as science laboratories, that are essential to provide world-class educations; and to fund maintenance needs of other critical infrastructure, such as dormitories, dining halls, and energy plants. The interest rate on municipal bonds is significantly lower than on taxable bonds. At a time when colleges are striving to make higher education more affordable to our students, the elimination of access to municipal markets will increase college operating costs by increasing the cost of their physical infrastructure.
Further, the proposal would implement a new 1.4 percent excise tax on many private university endowments. Denison has a healthy endowment due to the generosity and sacrifice of alumni, parents and friends, skillful investment management, and a responsible spending policy that benefits current students and preserves funds to benefit future students. Denison’s endowment provides essential support for student financial aid (scholarships), but it also serves as a funding source for faculty, libraries, laboratories, campus housing, student services, and other components that are key to a student's education. In all, just over 30 percent of the operating budget is supported by Denison’s endowment. If this support were reduced, the impact to our operations could be dramatic.
Unlike for-profit corporations, Denison’s planned financial strategy is to operate at a zero, or a very small, operating surplus. We keep our charges to students and families as low as possible while covering operating expenses. This is sound fiscal management, but we also are strategizing to make higher education affordable for future students. Consequently, Denison has no targeted surplus that could be used to pay for this unprecedented and unequally applied tax.
Taken as a whole, the proposed tax plan provisions affecting higher education will reduce access and increase the cost of a degree. This is in direct opposition to previously stated legislative goals of increasing access to and affordability of higher education for all students. The proposals directly contravene the stated intent of the bill’s supporters to help lower- and middle-income Americans. This is especially true in a workplace environment that continues to demand more, not less, education to secure the work and professions that remove Americans from poverty and increase the economic stability and prosperity of the country.
Vice President of Finance and Management