COUNTERPOINT: Students could reap long-term benefits from GOP tax plan


Luke Phillips | Daily Trojan

First off, I claim no expertise in tax policy. I’m an incompetent college kid whose parents manage the bulk of his finances. The closest I ever get to the federal tax code is the byzantine W-9 form I fill out whenever I take on another part-time gig, or otherwise that little number on my receipts that subsidizes megabanks and makes F-35s fly. Like the Force, tax policy is all around us, flowing through everything we do; but most of us, including me, are nowhere near being fiscal Jedi (probably more a function of the blissful ignorance of middle-class privilege than anything else.)

However, there’s a major tax plan under debate in Congress right now, and as an opinion columnist, it’s my duty and purpose to explain it to my fellow college students on the cusp of adulting, and tell them what bodes if it passes. So here goes nothing.

The two most important functions of this multifaceted and nebulous plan are the lowering of the corporate tax by almost half, and the simplification of personal tax rates from seven income brackets to four.

More controversial are some of the plan’s less central features — namely, the removal of the state and local income tax deductions, and (of interest to college students) the removal of the student loan interest and medical expenses deductions. (Deductions are benefits that reduce an individual’s personal tax rate based on specific conditions they face — such as high state and local taxes, student loans and medical expenses.)

The removal of the state and local tax deduction and the student loans deduction would particularly hit college students and recent graduates, because a) many major universities and post-graduation employment hubs, including USC and its surrounding communities, are in states or at least cities with comparatively higher tax rates than areas with a lower saturation of bachelor’s degrees; and b) for various reasons, a large percentage of college graduates graduate with student loans. Living in blue cities and having debts to pay formerly granted recent graduates somewhat lower taxes; if the current plan is signed into law, those protections go out the window, and there will be a direct effect on graduates’ pocketbooks.

Art by Lisa Kam | Daily Trojan

Now, that’s not entirely a cause for alarm. As Julius Krein notes over at American Affairs, the student loans interest deduction is a pittance ($625, maximum) compared to the vast piles of debt we lug behind ourselves as we graduate. And the income brackets adversely affected by the removal of the state and local tax deduction are higher on the income scale, so recent graduates making starvation wages plus tips are affected as harshly as the lower-income residents of blue cities — that is, not as harshly as the lawyers and businessmen higher up the income chain in those same cities. (It’s a poorly hidden secret that this tax plan is in many ways a slam against the “liberal elites” who formed and continue to form much of the vocal opposition to the Trump administration. “The power to tax is the power to destroy,” politics really can be this petty).

One of the aforementioned primary effects of the plan — a lower corporate tax — might be helpful to college grads in the longer run. The lower corporate tax (yes, this does mean those big ugly corporations get to make more money) is largely a ploy to lure corporate investment toward American shores, so it seems. Our high corporate tax is one catalyst of the great offshoring of capital and operations that was such an issue in the 2016 campaign, which is now coming back to the fore with the Paradise Papers. More corporate investment usually means more capital and more job opportunities in regions previously left in the rain.

So the removal of various pro-student and graduate deductions is inconvenient and would hurt people. But the entirety of the tax plan, all things considered, doesn’t appear as bad as it’s occasionally been made out to be. And if we’re looking at the one aspect of “America First” that pretty much everyone can agree is a good thing —  the onshoring of capital from the Cayman Islands back to Wall Street for reinvestment in Wheeling and Watts, two underprivileged cities — the dimmer sides of this tax plan fade in importance.

Again, I know nothing about tax policy beyond what I’ve picked up from thought journals and anecdotes. But the fact that most established political actors, left and right, are opposing it, tells me something might be good about it.

Luke Phillips is a senior majoring in policy, planning and development. “Point/Counterpoint” runs Wednesdays.

  • Nope

    “But the fact that most established political actors, left and right, are opposing it, tells me something might be good about it.”
    That’s a dangerous argument. You’re assuming that the established politicians must have bad intentions, that they must be trying to save themselves from something, in an attempt to find a good reason behind this plan.
    If anything, the nonpartisan nature of the opposition should tell you that it is indeed a dangerous one.

  • Thekatman

    When you get your first job and start moving your hard earned dollars into your 401(k) plan, you’ll be so happy to know that the companies investment instruments that are represented in your 401(k) plans are growing and making you money while you party after work…. at least until you get married and start a family, then the party changes direction. :-)

    If we do not have a strong economy, everyone suffers to some degree, well, except the 1% ers. There will always be the 1% folks, as they are in every country on the planet. That’s the way it is, and isn’t going anywhere until we;re living in the worlds of Star Trek, Star Wars, a few millennia away.

    I wouldn’t get all hung up on the reduction in personal taxes for the rich. What is rich these days? Everyone deserves a tax break, and thinking that the rich don’t need a tax break, wasn’t this country built on equality for all? What about protestuing the overburdened spending habits of our government, a bloated decaying whale of an institution that was enormously expanded during the Obama years. Time to put the feds on a major fiscal diet.

    What about the tax and spend policies of the CA legislature in Sacramento? CA will soon have the highest state income taxes in the country, and following that real estate taxes will increase. State income taxes are already at an all time high of 13%, on top of the federal taxes, and then once the feds take away some of the federal funding becasue of CA status as a “sanctuary state”, Scato will be forced to increase our taxes again. Then you’ll find cities increasig their local taxes. Soonm, the only people living in CA will be illegals, the poor and the uber rich. Businesses have been leaving CA since the 1990’s due to the high cost of doing business in this state.

    CA used to have one of the highest quality education systems in the country and now ranks near the bottom.
    CA has the highest percentage of welfare recipients per capita than any state in the country, at about 22% of the population against the national average of 19%.

    As a student who is soon to enter the workforce, my advice is to vote against any and all spending programs and vote for Sacto expense reductions. The biggest threat to your workforce opportunities in CA is a fleeing business climate. For the average worker that is hurting their future. If you graduate with a degree in the sciences, media and entertainment, accounting and finance, you have a chance.

    CA state legislature is not your friend. They are working to take your money, tell you what to eat and how much, what you can think and say, and to control your life to the point to where you must rely on the government for your subsistence. Just look at the welfare system. It was designed back in the 1960’s via president Johnson’s Great Society Plan, to incentivise the black communities to rely on the gubmint for their subsistence and livelihood. Is that were you kids want to go these days?

    Luke, I am your fahthuh! You’ve heard that a lot I’m sure.
    You made a very well thought out statement and it it so right on, that I’m restated it here. You are so on point.

    “So the removal of various pro-student and graduate deductions is inconvenient and would hurt people. But the entirety of the tax plan, all things considered, doesn’t appear as bad as it’s occasionally been made out to be. And if we’re looking at the one aspect of “America First” that pretty much everyone can agree is a good thing — the onshoring of capital from the Cayman Islands back to Wall Street for reinvestment in Wheeling and Watts, two underprivileged cities — the dimmer sides of this tax plan fade in importance.”

    BTW: are you from Wheeling IL?

    Perfect!
    Fight On.
    Beat The Buffs.