Students reconcile impacts of the tax bill on low-income students

In late December, the most sweeping rewrite of the tax code in decades was passed.

In late December, the most sweeping rewrite of the tax code in decades was passed. Buy this photo
Amelia Cacchione/Daily

 

Wednesday, January 10, 2018 - 9:26pm

University alum Sean Smith graduated last winter, and now works as a fellow in LSA Dean Andrew Martin's office. When he goes home to visit his family, Smith says his family relies on him for more information on current events. Recently, his family has been pressing him about the passing of the tax bill, but narratives like his family's are often left out of resources, leaving Smith, and many others, confused.

“When I went home, the first thing my family asked me was how I feel about the tax bill,” Smith said. “They expect me to have the knowledge being first-gen, but I just haven’t been able to find it. The biggest thing that I can say is that there is no perspective from my tax bracket in the conversation. That should be telling.”

In late December, Congress passed the most sweeping rewrite of the U.S. tax code in decades. The bill slashed the corporate tax rate, doubled the size of inheritances shielded from taxes and allowed pass-through businesses greater deduction. But most startling to many students at the University of Michigan are the changes for individual taxpayers.

According to PBS News, Americans making over $500,000 a year would see a net benefit worth 3 percent of their income – approximately $21,000 in 2019. However, all Americans making $30,000 will be giving up more in taxes, and middle-class Americans making between $40,000 and $75,000 will have tax cuts that dwarf in comparison to those of upper-class Americans.

In Washington, D.C., Democrats voiced strong opposition to the bill. Senate Minority Leader Sen. Chuck Schumer, D-N.Y., went so far as to say the bill is ruining America because of the financial burden it will place on low-income Americans.

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But at the University, which has been criticized for its high concentration of upper-class students —t he median family income of a student at the University is $154,000 — multitudes of high-income students say they find themselves reconciling their tax cuts with the burdens low-income students could face. The average University student, then, would stand to gain approximately $2,094 in the next fiscal year under the new tax plan. The 3,000 students on campus recieving free tuition via the new Go Blue Guarantee, on the other hand, hail from families with household incomes of $65,000 or less. At most, these lower income brackets will recieve 150 percent less than the average University student. The lowest brackets could lose as much as $384 over the next two years. 

Public Policy junior Lauren Schandevel said the tax increases on low-income households could generate issues for them while upper-class students remain untouched.

“The eventual tax increase and healthcare premium hike on lower- and middle-income households will make paying for college –– and necessities like rent, food and textbooks –– even less likely, while the sustained cut for higher-income households will allow wealthier students to purchase all of these things with plenty to spare,” Schandevel said.

However, Engineering sophomore Lincoln Merrill, publicity chair of the University’s chapter of College Republicans, said people will face different financial impacts from the tax bill because of factors like size of the household. He said blaming the differences on high or low income is for purely political reasons.

“Overall, most people will benefit with only a few people not benefitting from the new bill,” Merrill said. “However, this has nothing to do with high-income versus low-income households but rather depends on other factors such as size and location of the household among other factors. The claims that the new bill will help high-income students while hurting lower income students are completely false and likely have been made on political grounds alone as even low-income students will benefit, in some cases more than high-income students.”

Nursing sophomore Lori Fong said her parents now make a relatively high income, but originally came from a lower socioeconomic status. She said the tax bill will only reinforce cycles of poverty, something her family was lucky to escape.

“If you have parents who make a generally high income, then you are going to be more likely to succeed. You have that advantage already. People who complain about money going to lower-income people, but then complain about there being lower-income people… it's just hypocritical,” Fong said.

Smith said articles written usually quote people who make around six figures, leaving little context for those who are already marginalized. Still, he said he doesn’t feel any resentment toward people who will benefit from the bill.

“I don’t feel any resentment,” he said. I just try to inform people of the privilege they do have, but at the same time, not shame them. “I just need people to think about it.”

Abby Takas contributed reporting to this article.