BY ANNA SHORTRIDGE ’19
In the early morning hours of Saturday, Dec. 2, the U.S. Senate voted in favor of the Republican tax bill, “Tax Cuts and Job Act” 51-49. The bill focuses on cutting taxes for businesses, including lowering the tax rate for big businesses from 35 percent to 20 percent. Also, according to the Washington Post, the bill will make large changes to health care that may lead 13 million Americans to drop insurance, open up more land for drilling in Alaska and alter the treatment of state and local taxes, affecting local government budgets. The House of Representatives passed their version of the tax bill on Nov. 16.
The 479-page senate bill also includes many provisions that will severely impact higher education. According to an article from the Chronicle of Higher Education, both the House and Senate versions of the tax bill call for a tax on a select group of private colleges. The House bill strives to tax colleges that enroll at least 500 students and have assets of $250,000 per full-time student; these colleges would pay a 1.4 percent tax investment. Roughly 65 private colleges would be taxed under this plan, including Mount Holyoke.
The College does not put its entire endowment towards financial aid; instead a portion of the endowment is used each year for the school’s operating budget, which includes financial aid and funds that go towards the running of the school such as faculty salaries and campus maintenance. According to a letter from Acting President Sonya Stephens to Senator Elizabeth Warren, Mount Holyoke drew $35 million from its then $729 million endowment for this past school year. “That $35 million represents 26 percent of the school’s operating budget and was used in large part to support scholarships and faculty salaries,” said Stephens.
Stephens explained in a separate letter to Congressman Neal that if Mount Holyoke’s endowment income was taxed at the proposed 1.4 percent rate in the House bill, the College would’ve had to pay approximately $1.2 million in taxes last year.
“New annual expenses on this order would inhibit both our ability to provide aid to our students and the ability of our endowment to keep up with inflation,” said Stephens. “At the same time, the tax would serve as a disincentive to potential donors.”
Shannon Gurek, the vice president for Finance and Administration and treasurer, noted that the Senate Finance Committee had been looking at endowments, especially those of larger schools. She said that for years, questionnaires have been sent out by various government entities asking colleges how their endowments are used. It hasn’t been clear until now why these questions were being asked.
“They would ask: ‘How are you using this money?,’ ‘How do you put it towards your mission?’ ‘How does it impact students?’ So in that particular aspect there’s been lots of questions, but never real clear understanding of how it would have teeth. This is the first time we’ve seen the teeth come out,” said Gurek.
Gurek noted that Mount Holyoke would do its best to continue to provide aid for its students. However, she said that what may change for the College is that fewer resources would be available to offset providing for financial aid.
“Our mission is focused on accessible education, so that will always be our priority,” said Gurek. “But the question is, would we be able to invest in a new makerspace? Would we have to reduce the number of student jobs? Would we have to reduce the new faculty we bring in? In other words, how would we modify the way we operate to be able to maintain the commitment to our students?”
The Senate bill restricts the tax on endowments to colleges with assets of $500,000 per full-time student. While Mount Holyoke is not included in this number, Gurek says the Colleges being taxed will be decided when the House and Senate come together for the next step in the process of fully passing the bill.
Another troubling aspect of the bill is the taxing of graduate-student tuition waivers. Many graduate students hold positions as teacher’s assistants or research assistants as a supplement for paying tuition. However, under the House’s version of the tax bill, graduate students will be taxed on the waivers they receive and in turn would be discouraged from enrolling in graduate school, according to the Chronicle.
Eighty percent of students continue onto graduate or higher degree programs after attending Mount Holyoke, according to the Career Development Center. Sophie Angelique Desnoyers ’19 hopes to attend graduate school, but she is now concerned that her goal may be more expensive than originally anticipated.
“I want to attend grad school to get my master’s in mental health counseling and I even thought of getting a Ph.D. in clinical psychology. However, when news about the bill came out, I wondered if maybe I should just do a master’s part- time and work. The people who planned this bill didn’t care that people without loads of money would be affected.”
The bill would also remove Section 117(d) of the tax code, which provides a tuition reduction for the children of college staff. Gurek explained that each college has a different way of providing this reduction.
“If your child goes to Mount Holyoke, then you’ll receive a tuition waiver. But, if you’re a staff member at Amherst College, they give something like $10,000 to the child no matter where they go to college. And this would be a tax-free benefit, so the money would go directly to the school and it would never come into your control and therefore you’re not taxed. So this [new tax bill] would add a tax to that money you have little to no control over,” said Gurek.
“I believe the administration of Mount Holyoke needs to do more to speak out against this injustice," said Mathilda Scott, president of the Mount Holyoke College Democrats. “So far President Stephens has only written one very polite letter to Congressman Neal, who was already opposed to the tax bill. Mount Holyoke takes pride that 80 percent of our students continue on to graduate or professional schools so Mount Holyoke should be more outspoken in protecting current and future Mount Holyoke alumnus."
Gurek recommended that concerned students call the offices of their elected officials and express their concerns. “I think that’s how these representatives get their jobs — by hopefully representing the interests of their constituents. So, letting them know what you think about it [the tax bill] is a good way to help,” said Gurek.