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Editorial: Tax Plan Helps Rich Families, Harms School Tax Payers

We’re now seeing class warfare – in more ways than one.

We pay for public schools through local property taxes as well as through state income and sales taxes. All of us pay for these schools, including those of us who do not have children or whose children attend private schools. That’s the nature of public services – we all pay for them, even if we don’t have any personal benefit.

Most of the taxes we pay are to the federal government, since the federal government does some extremely expensive things like maintaining the armed forces. But historically, the federal tax code has allowed us to write off the school taxes we pay. That’s a sensible deduction to allow – after all, without it, our income would be doubly taxed.

Now Republicans in Congress want to eliminate the deduction for state and local taxes, including our school taxes (which are the overwhelming majority of property taxes in Pennsylvania). The elimination of this deduction was part of both versions of tax reform – the one passed by the House of Representatives on Thursday, Nov. 30, and the one passed by the Senate in the wee hours of Saturday, Dec. 2, in a vote so hasty that nobody had time to read the entire bill. No matter how they may try to spin it otherwise, they voted for double taxation.

But here’s where it gets truly disgusting: Both the House and Senate versions also included an expansion of “529 plans.” These plans allowed families to invest money and have it grow tax-free to pay for higher education. Plenty of families who make most of their money from working, as opposed to investments, have used these plans to save up for college when their children are born, then used it to pay for part or all of college, minimizing the debt their sons and daughters take on for higher education. The typical in-state tuition in the Pennsylvania State System of Higher Education is $7,492 a year, so with careful planning, a working family can save and invest enough money to pay for the $30,000 or so cost of four years of tuition. Letting this money grow tax-free makes sense, since it leads to a more educated population, which should lead to greater economic growth in decades to come.

But under the expansion of this supported by Republicans in Congress, the 529 plans can be used for K-12 education. Most working families get K-12 education for their children in public schools, so they’re not paying tuition. And since K-12 education comes much earlier in a person’s life than higher education, there’s not much time to save and invest for it. So working families who do pay K-12 tuition will generally be paying it year by year rather than saving and investing for it in advance.

Who benefits from this? Families who have a lot of money to invest. Wealthy families can invest a good deal of money during a child’s preschool years or even before the child is born. But families who need most of their earnings to live on will not be able to save and invest much for K-12 education. So the overwhelming majority of this tax break goes to wealthy families.

An analysis by The New York Times broke it down this way: A family can open a 529 account with $200,000. (Of course, a family would have to be pretty wealthy to have $200,000 sitting around.) If that grows at 6 percent a year and the family withdraws the maximum $10,000 in each of the 13 years of kindergarten through high school, the family saves $2,380 in taxes each year, for $30,940 over the 13-year period. Those of us who don’t have $200,000 sitting around to open the account won’t benefit much from this. Those of us who use public schools for K-12 education won’t benefit at all.

The term “class warfare” is most often used in reference to economic classes, such as the underclass, working class, middle class and ruling class. But this is not only a blow struck by the ruling class onto all those below, it’s also warfare in how we pay for school classes.

Republicans in Congress have gone from simply not caring about the concerns of working people to outright hostility. This is the type of behavior that we used to see only from cartoon plutocrats. If Dwight Eisenhower could see what his party is doing today, he would roll over in his grave so rapidly that we could affix a dynamo to his corpse and generate enough energy to power the electric grid.

 

The preceding editorial is the opinion of The Elizabethtown Advocate. Other opinions on this page are those of individual contributors. The Advocate aims to give its readers a wide variety of opinions.

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