Congress finalized the FY2018 budget resolution, H Con Res 71, which paves the way for tax reform to officially begin. The House adopted the Senate's amendment to the budget resolution on October 26 by a vote of 216 to 212.
The budget resolution includes broad goals for education on ensuring State flexibility; enhancing outcomes with Federal workforce development, job training, and reemployment programs; the consolidation and streamlining of overlapping early learning and child care programs; educational programs for individuals with disabilities; and child nutrition programs.
The budget resolution also includes provisions to address investments in rural schools and in school districts/communities affected by the recent natural disasters. Section 3020 calls for a reserve fund for legislation regarding disaster relief and recovery efforts to areas impacted by hurricanes and flooding. Section 3021 pertains to healthcare reform and "protecting the Medicaid program…which may include strengthening and improving Medicaid for the most vulnerable populations," as this impacts school-based Medicaid services.
Tax Reform & State and Local Tax Deductibility
The budget resolution includes an amendment adopted in favor of discontinuing state and local tax deductions (SALT) currently claimed by more than 44 million taxpayers on federal tax returns. If SALT were eliminated in tax reform legislation, the local impact would result in taxpayers being taxed twice and would create instability in state and local tax bases that support investments in public education and other public services. NSBA, the National Association of Counties, U.S. Conference of Mayors, and other state and local government groups have formed a coalition to continue the SALT deduction called Americans Against Double Taxation. As Congress considers a number of proposals for a federal tax overhaul, NSBA urges Congress to champion investments in our public-school districts and to reject measures--such as tuition tax credits/vouchers and the proposed SALT repeal--that would negatively impact resources for public education. Please reference additional information that provides greater details about the impact of eliminating SALT at www.americansagainstdoubletaxation.org.
As a tax reform bill is expected this week, NSBA released a statement to support retaining the SALT deduction. "The elimination of the state and local tax (SALT) deduction is an assault on local governance in education," said NSBA Executive Director and CEO Thomas J. Gentzel. "As the tax reform debate continues, we urge Congress to support our students, their families and communities by maintaining the longstanding SALT deduction."
For additional details about the detrimental effects of eliminating the SALT deduction, please reference this paper by the Center on Budget and Policy Priorities. "This strain on state and local budgets from repealing the federal SALT deduction would likely result in cuts down the road to state and local services," according to the Center on Budget and Policy Priorities. "These cuts could well include reductions in support for education - the single largest part of state budgets - as well as cuts to infrastructure spending and other investments that are key to the nation's long-term economic prospects. Since states and localities provide over 90 percent of K-12 school funding, and pay 75 percent of the cost of maintaining and improving the nation's non-defense public infrastructure assets, their capacity to make these investments is particularly important to the nation's future economic strength."
In addition to sustaining state and local tax (SALT) deductibility, NSBA's priorities for tax reform include educational choice, tax-exempt financing for school infrastructure and provisions affecting teacher recruitment and retention.
Educational Choice: NSBA urges Congress to reject the implementation of a federal tax credit and/or voucher program that would divert resources away from our school districts, which educate more than 50 million students. Please reference NSBA's issue brief for further information.
Tax-Exempt Financing (School Bond Programs): NSBA supports the utilization of tax-exempt bonds for construction and other capital improvement projects approved by traditional local school boards. Further, NSBA opposes any efforts to limit the issuance, tax-exempt status and advance refunding of such bonds through changes in the federal tax code.
Teacher Recruitment: NSBA urges Congress to permanently repeal the current Windfall Elimination Provision (WEP) and replace it with a fair formula to: (a) provide equal Social Security benefits that were earned by educators who paid Social Security taxes at some point during their careers; and, (b) guarantee educators and their surviving spouse receive the benefits they earned while they paid into Social Security. The WEP is affecting school district efforts to recruit and retain effective educators and address teacher shortages that exist in several communities.