Cash for College? House Committee Advances Tax Breaks for Students

Cash for College? House Committee Advances Tax Breaks for Students

Sean Morrison[*]

 

With students long gone on summer break, the House Committee on Ways and Means recently advanced legislation by a vote of 22-13 that combines several of the existing tax incentives for higher education into one unified tax credit.[2] Representatives Diane Black (R-TN) and Danny K. Davis (D-IL), who introduced the Student and Family Tax Simplification Act of 2014 (H.R. 3393) last October,[3] said in opening remarks to the June markup that a streamlined credit for higher education costs would better serve families coping with the rising cost of post-secondary education.

The Committee bill is likely just an election year talking point rather than a realistic effort at reform. Yet it does provide a preview of what’s ahead in 2017, when Congress will have to make a decision on the future of tax incentives for higher education.

The short bill—totaling only 14 pages—combines three current tax incentives, the American Opportunity Credit (AOTC), the Lifetime Learning Credit, and the tuition deduction—into a single AOTC.[4] The new incentive would provide a dollar-for-dollar (100 percent) credit for the first $2,000 of qualified higher education costs and a 25-percent credit for qualified costs above $2,000. The Act caps the new AOTC at $2,500 and makes the credit refundable up to $1,500.

Graduate students would undoubtedly fare better under the proposal than they do under current law.[5] Unlike the current AOTC, the new credit would not be limited to the first four years of a student’s post-secondary education. And the new credit is more valuable to graduate students than the existing Lifetime Learning Credit because the new credit has a higher cap and is partially refundable. The current Lifetime Learning Credit, on the other hand, has a lower cap, uses a more complicated credit calculation formula, and is not refundable. For undergraduate students, the new simplified credit increases the refundable portion by $500. And undergraduate students convicted of a felony for possession of a controlled substance, who are currently ineligible for  the current AOTC, would be eligible for the new credit.

The Joint Committee on Taxation (JCT) estimated that the bill, as introduced by Rep. Black and Davis, would cost $35 billion over ten years (including the offsetting increases in revenue generated by eliminating existing provisions).[6] Chairman Camp, however, made several modifications, such as increasing the income level at which the credit phases out, resulting in a revised estimated cost of $96.5 billion.[7] While the cost may seem steep, Congress cannot avoid a major expense on education incentives in the near future unless it is willing to let education incentives revert back to pre-2009 levels. The current AOTC expires in 2017 and the last AOTC extension—from 2012 through 2017—was estimated to cost $67 billion (without the offsetting impact of eliminating the tuition deduction or Lifetime Learning Credit).[8]

Rep. Davis and Rep. Black began working to reform higher education tax incentives as Chair and Co-Chair of the Tax Reform Working Group on Education, one of several working groups put together by Chairman Dave Camp (R-MI) and Ranking Member Sandy Levin (D-MI) in February of 2013.[9] Much of the Student and Family Tax Simplification Act was incorporated into Chairman Camp’s comprehensive tax reform proposal released earlier this year. Camp’s comprehensive plan includes other changes that would help offset the cost of the education incentive overhaul.[10] But Chairman Camp’s grand plan has almost zero chance of advancing in the next few months.[11] And Camp’s tenure at the helm of the powerful Committee on Ways and Means will end next January—no matter what happens at the polls in November.[12]

In this environment, the House Committee has started advancing smaller, piecemeal proposals, such as the Student and Family Tax Simplification Act. Yet the Committee has only taken up politically popular, revenue-draining proposals, including a proposal to make the research and development tax credit permanent and an expansion of the child tax credit.[13] So far, the Committee has left the less popular, revenue-raising parts of Chairman Camp’s plan alone. The Committee has recently even taken up proposals that reverse course from less popular parts of Chairman Camp’s five-month-old plan: the Committee advanced, and the House passed, a proposal to make bonus depreciation permanent, which JCT estimated would cost $263 billion over ten years.[14] Chairman Camp’s overhaul plan would have let the lucrative provision expire.

All of this suggests that the piecemeal proposals, including the Student and Family Tax Simplification Act, are not a new strategy to enact comprehensive tax reform before Camp’s retirement, but rather an old strategy for generating talking points in an election year.


[*] J.D. Candidate, Harvard Law School, 2015.

[2] Markup of: H.R. 3393, “Student and Family Tax Simplification Act”; H.R. 4935, “Child Tax Credit Improvement Act of 2014,” House Committee on Ways and Means (June 25, 2014), https://waysandmeans.house.gov/event/markup-of-h-r-3393-student-and-family-tax-simplification-act-h-r-4935-child-tax-credit-improvement-act-of-2014/ [https://perma.cc/6QFT-T55Y]; Votes of the Committee, House Committee on Ways and Means (June 25, 2014), https://waysandmeans.house.gov/UploadedFiles/H.R._3393_Final_Passage.pdf [https://perma.cc/GTC6-TMBJ].

[3] H.R. 3393, 113th Cong. (2013).

[4] Markup Text of H.R. 3393, House Committee on Ways and Means (June 25, 2014), https://waysandmeans.house.gov/UploadedFiles/HR_3393_062514.pdf [https://perma.cc/4CKP-QCPV].

[5] See Description of H.R. 3393, The “Student and Family Tax Simplification Act,” Joint Committee on Taxation (June 23, 2014), https://www.jct.gov/publications.html?func=startdown&id=4622 [https://perma.cc/C3JN-Y3C3].

[6] Id.

[7] See Description of An Amendment in The Nature Of A Substitute To The Provisions Of H.R. 3393, The “Student and Family Tax Simplification Act,” Joint Committee on Taxation (June 24, 2014), https://www.jct.gov/publications.html?func=startdown&id=4624 [https://perma.cc/NSJ9-FQSP].

[8] Estimated Revenue Effects Of The Revenue Provisions Contained In An Amendment In The Nature Of A Substitute To H.R. 8, The “American Taxpayer Relief Act Of 2012,” As Passed By The Senate On January 1, 2013, Joint Committee on Taxation (Jan. 1, 2013), https://www.jct.gov/publications.html?func=startdown&id=4497 [https://perma.cc/PX58-H3HE].

[9] Bernie Becker, Ways and Means unveils tax reform working groups, The Hill (Feb. 13, 2013), http://thehill.com/policy/finance/283021-ways-and-means-unveils-tax-reform-working-groups [https://perma.cc/H5NY-B4Y3].

[10] Camp Tax Plan Has Implications for Higher Education, Nat’l Assoc. of Student Personnel Administrators (Mar. 5, 2014), https://www.naspa.org/rpi/posts/camp-tax-plan-has-implications-for-higher-education [https://perma.cc/6Y52-6GD2].

[11] Martin Sullivan, If Camp’s Tax Reform Bill Won’t Pass, Why Is It So Important?, Forbes (Mar. 10, 2014), https://www.forbes.com/sites/taxanalysts/2014/03/10/if-camps-tax-reform-bill-wont-pass-why-is-it-so-important/ [https://perma.cc/5ED5-TB49].

[12] Mark Tower, U.S. Rep. Dave Camp: ‘I don’t have any plans’ after congressional term is up, MLive (last updated Apr. 25, 2014), https://www.mlive.com/news/saginaw/index.ssf/2014/04/us_rep_dave_camp_i_dont_have_a.html [https://perma.cc/Z7RS-M69J].

[13] See Bernie Becker, House Ways and Means to consider more tax breaks, The Hill (Mar. 23, 2014), http://thehill.com/policy/finance/207162-house-ways-and-means-to-consider-more-tax-breaks [https://perma.cc/LJN5-TVT3]; Richard Rubin, Child Tax Credit Gets Boost From House Republican Plan, Bloomberg (June 23, 2014), https://www.bloomberg.com/news/articles/2014-06-23/child-tax-credit-gets-boost-from-house-republican-plan [https://perma.cc/W5Z8-565Z].

[14] Howard Gleckman, Dave Camp’s Great Bonus Depreciation Flip-Flop, Forbes: Business in the Beltway (May 29, 2014), https://www.forbes.com/sites/beltway/2014/05/29/dave-camps-great-bonus-depreciation-flip-flop [https://perma.cc/79J4-5GEQ].

Volume 51, No. 1 Available Online

Volume 51, No. 1 of the Harvard Journal on Legislation, featuring articles by Congressman Clyburn (D-SC), Professors Alejandro E. Camacho of UC-Irvine Law School and Professor Robert L. Glicksman of George Washington University School of Law, Joseph Henchman and Christopher L. Stephens  of the Tax Foundation, and Professor Linda Sugin of Fordham Law School, was published on March 12th and is now available on the JOL website!

2014 Symposium Recap

Over lunch on February 11 and 12, the Harvard Law School Journal on Legislation hosted its annual symposium. This year’s topic, Drug Policy: Reality and Reform, proved timely and engaging to members of the Harvard Law community. Welcoming a standing-room-only audience to hear from some of the field’s leading experts and authorities, JOL succeeded in creating a meaningful dialogue around a topic seeped in critical statutory and policy implications.

The first panel opened with brief remarks from Jeffrey Miron, a Senior Lecturer on Economics at Harvard University who is known for his economic insights on the war on drugs and other related topics. The discussion, moderated by Harvard Law professor and former Deputy U.S. Attorney General Phillip Heymann, jumped immediately to brief historical accounts of the drug war, focusing specifically on an aspect which all panelists had dealt with in their careers: mandatory minimums. The perspectives ranged from academic theory to first-hand accounts from a former judge and the state director of a national non-profit organization working on the topic.

Former federal judge for the District of Massachusetts Nancy Gertner and John Pfaff, Associate Professor of Law at Fordham Law School, opened the conversation with detailed perspectives on the impact of mandatory minimums for drug offenses. Gertner recalled instances during her judicial career where she would have to sanction an offender per the mandatory minimum requirements and her frustrations, even when she felt that these minimums failed to produce the most equitable outcome. Gertner currently serves on the Board of Directors for The Sentencing Project, an organization working to advance the criminal justice system by promoting sentencing reform.

Professor Mark Osler of the University of St. Thomas Law School continued the thread of sentencing reform with his unique perspective of legal counsel in a critical sentencing case with far-reaching national impact. Osler served as lead counsel in Spears v. US where he successfully argued in the US Supreme Court that sentencing judges be allowed to reject the 100:1 ratio between crack and powder cocaine in the federal sentencing guidelines. Osler is renowned as a sentencing expert and has testified on the matter both in Congress and before the U.S. Sentencing Commission.

Finally, Barbara Dougan spoke on her experiences as state director for Families Against Mandatory Minimums (FAMM). Her organization works to reform sentencing laws in Massachusetts, and she was successful in contributing to the first-ever state drug sentencing reform in 2010. She urged her fellow panelists and the audience to remember that behind the statistics of drug sentences are individual human beings whose lives hang in the balance.

The conversation continued later in the evening during the documentary screening of “The House I Live in.” Students watched the condensed version of the film, which involved several personal narratives from offenders who had been sentenced under the mandatory minimum guidelines, experts in the field, and historians, among others.

The film was harshly critical of the drug war, and skeptically posed the question of how drugs become an actionable offense. The root of this issue, the film maintained, has unjust historical roots –  early privileged classes of individuals (i.e. the elite upper-class white) used drug offense enforcement as a means of discrimination against minority populations, sentencing the minorities in order to free up jobs. The film then traced the growth of this system, discussing the political enterprising of the “war on drugs” in the 1970s and 1980s and the concentration of drug trades in low-income urban areas. The film made no pretense of being a purely descriptive documentary—its intense anti-drug war advocacy was the focus throughout. One expert in the film even claimed the systematic discrimination in the current sentencing and prison system represents a modern-day Holocaust.

After the film, students engaged in a discussion with Osler and Dougan about some of the issues brought up by the documentary. Examining the range of topics and potential drug war solutions, from sentencing reform to outright legalization, the conversation concluded with an extremely pertinent and significant observation by Dougan. She noted how people talk about the extremes, mandatory minimums and a drug war on one end and sentencing reform and legalization on the other. But all of the steps in the middle, she said, represent progress. Dougan emphasized the lack of attention given to those small increments of progress that need to happen before we can get arrive at the other end of the spectrum.

One the second day of the symposium, the topic narrowed to the area of drug policy that has been dominating the headlines: marijuana.

With Colorado and Washington in the midst of implementing legal, recreational marijuana systems and other states such as Oregon and Alaska considering the move, the momentum would seem to be on the side of the reform movement. The standing-room only audience seemed to favor this approach as well. When moderator Professor Charles Nesson, himself a strong supporter of legal marijuana, polled the students in attendance, nary a hand went up in opposition to legalization.

The panel was more divided. Nesson’s support for legality was echoed by United States Congressman Jared Polis (D-Colorado), who was conferenced into the event via skype to offer introductory remarks. Panelist Ethan Nadelmann, Founder and Executive Director of the Drug Policy Alliance, posited that ending marijuana prohibition was a moral necessity to help stem the tide of broader drug war injustices. But the opponents of legalization put up a spirited defense in front of the skeptical audience.

Massachusetts State Senator John Keenan stressed the dangers of putting yet another substance with harmful and habit-forming effects in the hands of big corporations, who would react to the profit incentives in the market and sell cannabis aggressively. With such huge societal costs from tobacco and alcohol already, Keenan said, we should not rush to make things worse with a new commercialized drug. At the very least, he concluded, we should wait to see how the experiments in Colorado and Washington develop before we adopt legal marijuana nationwide.

Charles Stimson, Senior Legal Fellow at the Heritage Foundation agreed with Keenan and discussed what he called the often overlooked negative health effects of, and number of people receiving treatment for, heavy cannabis use.

Nadelmann countered that he’d be perfectly willing to wait and see how things went in Colorado and Washington if not for the fact that hundreds of thousands more Americans, a disproportionate percentage of them minorities, would be arrested for marijuana offenses in the interim. The bad effects of marijuana, he said, were not enough to justify the worse effects of so many needless arrests and disrupted lives.

There was no exit poll, so it is unclear whether Keenan and Stimson succeeded at changing some minds. The event as a whole, though, helped give a full and well-argued airing to the positions of all sides, as did the entire symposium. JOL hopes that students and faculty employ the perspectives they gained from the symposium as they evaluate and even participate in the debates surrounding American drug policy.

– 2015 Symposium Chairs Kellen Wittkop and Colin Ross

Prescription for Paternalism

Prescription for Paternalism

Jenna Tynan[*]

 

Multiple commentators have weighed in on the relative merits of the long-awaited Obamacare implementation.[2] Both perspectives, however, have shown that any legislation’s impact is determined not only by the text of the act but also by the parties affected. A recent personal experience at the doctor’s office demonstrates the reactionary impact of legislation. After determining that I had a common eye infection well treated by oral antibiotics, the physicians chose a different antibiotic regimen, referring to their inability to dispense the antibiotic for fear that I may be pregnant. I firmly vouched that I was not pregnant, but the physicians responded that they would like to take my word but could not do so.

At first, I thought that antibiotic manufacturers were now taking the paternalistic approach that isotretinoin (acne medication) producers have taken. Isotretinoin producers now require patients, pharmacists, and physicians to join the iPledge program to prevent pregnancy during medication ingestion.[3] However, my physicians’ prescribing choice was not driven by such a formalized program, but the combination of a labeling restriction promulgated in 2013 and, as I opine, fear of medical malpractice suits. The particular regulations on their face appear benign: providing for updated labeling requirements. The Act, among other things, requires warnings that highlight increased risks of birth defects for drugs falling in the FDA’s pregnancy categories C, D, and X.[4]

(As a side note, the category system weighs the benefits of the drug in each category against potential pregnancy-related risks. Drugs in Category A have the greatest benefit per risk ratio. Category X drugs, conversely, carry substantial risk per unit of benefit; labels for category X drugs require “contraindication” instructions strongly advising against use if the patient is possibly pregnant.)

However, physicians seem to have responded to these labeling restrictions by tightening their own prescribing decisions. Further, radiologists have either begun or have been recommended to conduct pregnancy tests before administering x-rays.[5] This anecdote underscores that well-thought-out and even uncontested regulations can produce unsavory effects. Now, a female of childbearing age seems to have, as Carol Gilligan has put it, “lost her voice” to vouch for her own pregnancy status without independent verification.[6] Yes, physicians and pharmaceutical producers do have specialized knowledge that average consumers do not, but that knowledge should not impair the patient rights of a particular class of individuals. Car manufacturers could use the same rationale, taken to its extreme, to require pregnant women to occupy only the back seat of a car for fear of miscarriage liability due to faulty airbag deployment.

Though I doubt we’ll ever approach such a result, I do believe that one’s autonomy in health decision-making should not be reduced based on being a female in a particular fertility cohort. Perhaps this particular reaction will indeed reduce birth complications. However, I posit that such reactions are a prescription for paternalism whereas patients would be better served with a double dose of autonomy.


[*] J.D. Candidate, Harvard Law School, 2016.

[2] See, e.g., Jules Witcover, Obama’s crowning legislative achievement is now his albatross, Baltimore Sun (Feb. 14, 2014), http://www.baltimoresun.com/news/opinion/oped/bal-obamas-crowning-legislative-achievement-is-now-his-albatross-20140213-story.html [https://perma.cc/PXW9-5GQM].

[3] Safety Notice, iPledge, https://www.ipledgeprogram.com/iPledgeUI/home.u [https://perma.cc/7RDF-GNXT].

[4] See FDA Pregnancy Categories, Chemical Hazards Emergency Med. Mgmt., U.S. Dep’t of Health and Human Servs., https://chemm.nlm.nih.gov/pregnancycategories.htm [https://perma.cc/N4TT-LUJY], citing Content and Format of Labeling for Human Prescription Drug and Biological Products; Requirements for Pregnancy and Lactation Labeling, 73 Fed. Reg. 30831 (May 29, 2008) (later codified at 21 C.F.R. pt. 201).

[5] See Kimberly E. Applegate, Pregnancy screening of adolescents and women before radiologic testing: does radiology need a national guideline?, 4(8) J. Am. Coll. Radiology 533–36 (2007).

[6] See Emily Eakin, Listening for the Voices of Women, N.Y. Times (Aug. 29, 2002), https://www.nytimes.com/2002/03/30/arts/listening-for-the-voices-of-women.html [https://perma.cc/MNW3-9XVM].

Student Loan Debt: Expansion of Borrowers’ Rights?

Student Loan Debt: Expansion of Borrowers’ Rights?

Kellen Wittkop[*]

 

College students navigate a constant balancing act of managing the many stresses that accompany enrollment at any institution of higher learning: classes, activities, job searches, etc. But one of the largest causes of anxiety for students is something that often looms largely in the shadows – debt. According to American Student Assistance, a non-profit organization that promotes itself as a “nonprofit you can rely on for neutral, honest student loan solutions,” of the approximate 20 million students in attendance each year, 60% (12 million) of those students borrow annually to cover costs of their education.[2] Estimates from the Federal Reserve Bank of New York and the Consumer Finance Protection Bureau (CFPB) put outstanding student loan debt in the range of $902 billion to $1 trillion.

Some members of Congress have recognized this problem and have taken action. In late December 2013, a group of Democratic senators—led in large part by former Harvard Law professor Elizabeth Warren—announced a package of bills aimed largely at giving student loan borrowers greater rights, now officially titled the “Student Loan Borrower Bill of Rights.”[3] Essentially, the bill seeks to amend the Truth in Lending Act to provide greater disclosure information to borrowers and direction for the order of payment applications by servicers, among other goals.

Some of the issues covered in the bill include: new regulations for servicing private loans (about 14% of all student loans) involving advising the borrower of their long-term options; a “Bill of Rights” section aimed at directing servicers to apply any extra money to outstanding loan principle with the highest interest rate, helping to ensure that borrowers pay down their more expensive loans first; a similar section for the “rights” of borrowers of federal student loans including an instruction to the CFPB to draft rules promoting cost-minimization for borrowers; and other sections involving specific provisions for members of the military and enrollment verifications for servicers.[4] The bill has been referred to the Committee on Health, Education, Labor, and Pensions.

For now, those of us with the specter of debt imminent to our futures, we can only hope that this bill and others like it will change the culture of student loan borrowing.  As Senator Jack Reed stated, “If we’re going to make a dent in making college affordable, we have to hold servicers accountable, increase transparency, and ensure students and their families get a fair deal.”[5]


[*] J.D. Candidate, Harvard Law School, 2016.

[2] Steven Hansen, Are Student Loans Destroying Consumption?, Seeking Alpha (Dec. 30, 2012, 3:09 AM), https://seekingalpha.com/article/1086811-are-student-loans-destroying-consumption [https://perma.cc/7YJP-XHBE].

[3] S. 1803, 113th Cong. (2013).

[4] Karen Weise, Unpacking the Proposed Student Loan Borrower Bill of Rights, Bloomberg Businessweek (Dec. 13, 2013), https://www.bloomberg.com/news/articles/2013-12-13/unpacking-the-proposed-student-loan-borrower-bill-of-rights [https://perma.cc/VK75-NWUN].

[5] Press Release, Office of Sen. Dick Durbin, Durbin, Warren, Boxer, Reed Introduce Student Loan Borrower Bill of Rights (Dec. 11, 2013), https://www.durbin.senate.gov/newsroom/press-releases/durbin-warren-boxer-reed-introduce-student-loan-borrower-bill-of-rights [https://perma.cc/GW8C-RNDP].

2014 Symposium – Drug Policy: Reality and Reform – Feb. 11-12

 

Join the Journal on Legislation for its annual Symposium, “Drug Policy: Reality and Reform.” There will be two panels, which will consist of short speeches, debate between panelists, and a question and answer session. Panera lunch will be provided at both panels!

The first panel discussion, held on Tuesday, February 11th at 12 noon in WCC 1015, will focus on the relationship between drug policies and mass incarceration. The speakers on the first panel will be:

  • Barbara Dougan, Massachusetts Project Director at Families Against Mandatory Minimums (FAMM)
  • Nancy Gertner, Professor of Practice at Harvard Law School
  • Mark Osler, Professor of Law at University of St. Thomas Law School
  • John Pfaff, Associate Professor of Law at Fordham Law School

The second panel discussion, held on Wednesday, February 12th at 12 noon in WCC 1015, will focus on the possibility of ending marijuana prohibition. The speakers on the second panel will be:

  • Senator John Keenan, Massachusetts State Senator for the Norfolk and Plymouth district
  • Ethan Nadelmann, Founder and Executive Director of the Drug Policy Alliance
  • Charles “Cully” Stimson, Senior Legal Fellow at the Heritage Foundation

We will also be showing “The House I Live in” on February 11th at 5 p.m. in WCC 2009, and dinner will be provided. Please join these events for a spirited conversation on these contentious and timely subjects!