Community Advocates Evaluate Tax Bill

As a massive federal tax overhaul championed by Congressional Republicans neared its final stages on Tuesday, Hamodia spoke to some of the askanim who have been at the forefront of advocating for what have been identified as key interests of the frum community in the hotly debated bill, especially provisions with broad implications for educational institutions.

Of particular concern since the early stages of discussion of the reform package was preservation of a provision known as Qualified Tuition Reduction (QTR), which shields teachers from taxes on tuition reductions they receive from their employers. Many private schools, and particularly cash-strapped mosdos haTorah, use free or reduced tuition as a major benefit to attract high-quality staff. Under QTR, the cash value of the tuition saved is not taxable.

Yet the version of the bill initially passed by the House of Representatives would have struck the QTR from America’s tax code.

“It would have been devastating,” Rabbi Abba Cohen, director of federal affairs for the Agudath Israel of America, told Hamodia. “It’s a way that schools maintain high standards in a climate of low salaries … Ultimately, a lot of schools would have had to pay higher salaries, which translates into higher tuition for everybody.”

In addition to opening up educators to higher taxes, the change would have also increased their level of taxable income, a potential problem for those who presently qualify for and receive government assistance programs.

Lobbying efforts of several Jewish organizations as well as others in the private-school community worked with Senate Budget Chairman Senator Orin Hatch (R-Utah) to see that the QTR was left untouched in the Senate’s version of the bill and that it remained so in the final reconciliation bill presently being voted on.

Together with the Agudah and Orthodox Union (OU), Beth Medrash Govoha (BMG) also took a leading role in lobbying efforts to preserve QTR.

“We homed in on some particularly serious threats to mosdos and mechanchim. Baruch Hashem, we are very pleased to see that those threats were removed in what seems to be the final bill,” Mrs. Chanie Jacobowitz, director of government affairs for BMG, told Hamodia. “Most of Congress didn’t even realize the effect eliminating QTR would have had on a lot of very modestly paid educators; they thought of it more as an issue for Harvard professors. Changing that perception was very important. They came to see that this cut would hurt a group that they had not intended to affect and certainly did not want to hurt.”

Another area of focus for community activists was a change introduced by Senator Ted Cruz (R-Texas) on a provision known as 529 savings plans. The accounts allow parents, or others, to set up tax-free investments for the express purpose of paying for college education. After discussions with a wide range of school choice advocates, Sen. Cruz expanded the provision to allow for the funds to be used to pay for private school tuition for kindergarten through 12th grade as well.

Rabbi Cohen said that while it was yet to be determined how much real benefit the expansion would have for the Orthodox community, the move was a major win for efforts to advance school choice programs.

“This could help some families who are in a position to put away money for tuition ahead of time, but it became important because it’s really part of a bigger issue … The proof of that is the fierce attack it’s come under from teachers’ unions who are painting it as a move against public schools,” he said. “We are not likely to get one huge school choice framework that will help everyone in the community at once, so we look at this as a good piece of a bigger puzzle and each of those pieces offer some help to the yeshivah community.”

After a vote of approval for the tax plan in the House on Tuesday afternoon, the 529 expansion plan was still under review by the Senate’s “parliamentarian,” or procedural expert. The review was made at the request of Minority Leader Charles Schumer (D-NY), who is leading his party’s efforts to oppose the larger bill. It remained unclear at press time whether the provision would be part of the final bill.

The OU led efforts to add a provision to the bill that would have allowed parents to write off up to 25 percent of tuition paid to private schools as a charitable donation. The clause had been added to the Senate bill, but was crossed off at the last minute, by hand, before a late-night vote. It had been added by Sen. Hatch, but was struck on a technical objection by the parliamentarian.

“It was a huge disappointment that this ambitious effort was thwarted at the last minute, but we are still grateful for the preservation of the QTR and 529 change and are optimistic that the community will be able to leverage the changes that were made to their advantage,” Nathan Diament, executive director for public policy for the OU, told Hamodia.

Other broader issues addressed by the bill, including the elimination of deductions for state and local taxes (SALT), a major boon for residents of high-tax states such as New York and New Jersey, as well as the doubling of Child Tax Credits, were also addressed by community advocates. Reviewing the near-final bill, both Rabbi Cohen and Mr. Diament felt that only time would truly tell what effects the bill would ultimately have for families.

“We are a diverse community in many ways and that includes geography and economics, so that will be a big factor in whether this will be a win or loss for you,” said Mr. Diament. “There is a lot of uncertainty as to what the real-world effects will be and they will only be seen over time … If the Republicans’ forecast is realized and the overhaul energizes the economy and makes more jobs, that will benefit the country as a whole and our community as well.”