'Mistake' in Republican tax plan taxes 1.3 million scholarship students more than millionaires

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19 May 2019

From Bernie Sanders to Elizabeth Warren to Kirsten Gillibrand to … lots of others, Democratic candidates in 2020 seem to have plans to lower the cost of education and make it possible for more Americans to attend college without drowning under a mountain of debt. Democrats recognize that education is critical to obtaining a good job, and that the cost of education in 2019 means that students are often saddled with loans that can not only erase the benefits of that education for years, but take those new college graduates out of the market for homes, or restrict their ability to move. In short, high costs for college not only means misery for graduates, it harms American companies at every level by depriving them both of workers and consumers.

So, naturally, Donald Trump is making it worse.

While Trump’s tax break for billionaires is just that—a plan that awards Trump himself tens of millions in tax breaks and means that some of the largest, most profitable companies in the country pay no tax at all—it punishes working class and middle class students. As The New York Times reports, students attending college on scholarships or financial aid packages are being taxed at a rate higher than Trump pays on his eight-figure income, with rates going up to 37%. That means that some of the students who most needed the money the most, but who made it into college on academic or athletic scholarships, or those who assembled an aid package that let them barely climb over the cost hurdle … are finding their mailboxes full with bills from the IRS. And, unlike Trump, they can’t get away with ignoring tax law.

Somehow, when they were crowing about this tax plan, Republicans failed to brag about how it was going to sock low income and middle class students for tens of thousands so that billionaires and corporate CEO’s could take home maximum benefits. It it seems like skimming from students wouldn’t make much of a difference, this isn’t just a slap on a few. This Trump tax hits about 1.3 million undergraduates and 15,000 grad students. And that’s not all. This “mistake” by Trump and the Republicans in designing their tax plan, is also taxing tribal funds paid to Native American kids to help them get an education … or simply to live. That’s quite a mistake.

But was it a mistake? The reason all these students are being hit is because the Republican law didn’t just include the special “kiddie tax” rate that was originally established to punish wealthy parents who tried to avoid taxes by hiding money under the names of small children, it expanded that tax. The new law increased the age limit from 14 to 23 and removed language that limited the application of the tax. That makes punishing low income and middle class students seem a lot less like an accident, and more like a plan.

Democratic Representative Elaine Luria is leading an effort to roll back the expanded “kiddie tax.” Republicans may claim that the fact that low income students are finding financial aid packages taxed at the same rate as the maximum paid by wealthy toddlers whose parents try to hide a few million under their blankets is a mistake—just something they overlooked in their headlong rush to express mail trillions to the wealthiest people in the world—but somehow getting them to agree to fix this mistake is “not far along.”

Republicans aren’t exactly rushing in to help fix this issue, because they worry that if they cooperate with Democrats on addressing the problem it 1) shows that their rushed-through tax bill is full of mistakes that harm people who aren’t millionaires, and 2) might allow Democrats to ask for other changes in the bill to fix other mistakes that are punishing working class Americans.