U. professor discusses how new tax plan could affect Rutgers students
New analysis shows that students in New Jersey will be among those hit hard by President Donald J. Trump's recently proposed tax plan.
According to CNN’s website, the bill called the Tax Cuts and Jobs Act would permanently lower the corporate tax rate to 20 percent and limit the home interest deduction to loans up to $500,000.
"The bill would also increase the standard deduction for individuals and households, repeal the alternative minimum tax and increase the child tax credit to $1,600. The House GOP bill would also repeal the estate tax in 2024," according to CNN.
Jay Soled, a professor and director of the Master of Accountancy in Taxation Program, said he does not think anyone has had a full chance to digest the proposal in its totality.
“Recall that they are trying to cut the tax rates but not explode the deficit as bad as it otherwise might explode. Apparently, the interest on student loans would no longer be deductible,” Soled said.
Soled said he runs the Master of Accountancy in Taxation Program and many of the professionals have their employers reimburse them. Those expenses that the employer reimburses are typically exempt from taxes up to $5,250, and under this proposal, that would be repealed.
“That could have some very serious implication for Rutgers graduate school programs where employers are typically footing the bill. Many employers may no longer provide that benefit,” Soled said.
Soled said the schools with large endowments may have an extra tax that did not exist before. It would likely not go into effect until 2018 because at this point it is all just proposals.
“There’s this talk about reducing state and local tax deductions which obviously have big bearings in New Jersey, where state and local taxes are much higher than most other states, and many New Jersey citizens avail themselves to those deductions. Home prices are higher in New Jersey than most other states, and they capped the mortgage interest deduction at $500,000,” he said.
Soled said that as a whole, New Jersey, as well as its students, will not fare very well from this tax proposal. He said Coverdell accounts, which allow one to make pre-tax contributions to their education, will be eliminated under this new proposal.
“The income tax rates as a whole should generally benefit students or their parents because there is an overall reduction of the tax rate. But, whatever they may save on income taxes, it may end up depending on how much they have been able to avail themselves of these credit deductions and exemptions, they may end up paying more. Everything has to be looked at on a case by case basis,” Soled said.
Many of these proposals may not sit well with senators and this could end up as a compromised bill. This proposal could send the United States further into debt of about $1.5 trillion over the next 10 years. But this is not the final word, he said.
Soled said that if people are troubled by this, they should reach out to their representatives and complain. Positions are up for re-election next year, and if citizens are vocal, their voices will be heard. If they are just passive, then they risk losing these benefits.
According to Washington Post, the tax reform plan could also transform many retirement plans such as the 401k.
“Although no details have come out yet, media reports say Republicans are considering limiting the pre-tax contributions to $2,400 a year, a considerable reduction from the current limit of $18,000," according to the article.
“The Republican Party is a big proponent of a consumption tax, where you are not taxed on income, and that you want to promote savings," Soled said. "It's antithetical to the Republican platform, in general, to cut back on these types of savings plan."