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Letter to Congress on Final Tax Extenders Package

December 08, 2015

Dear Member of Congress:

On behalf of the three million members of the National Education Association and the students they serve, we write to urge you to include and support the below provisions in a final bipartisan tax extender package. In particular, we urge your support of an extension of the educator tax deduction and the Qualified Zone Academy Bond (QZAB) program, and to include a full repeal of the excise tax provision of the Affordable Care Act in the tax extender package.    

Educator Tax Deduction

We urge you to support extension of the educator tax deduction, including the modifications passed out of the Senate Finance and House Ways and Means committees. In addition to the current $250 annual deduction, the bill passed out of committee includes professional development expenses as an allowable deduction and indexes the maximum deduction amount to inflation. The $250 per year educator tax deduction helps recognize the financial sacrifices made by educators who often reach into their own pockets to purchase classroom supplies such as books, pencils, paper, and art supplies for their students.  For example, during the 2013-2014 school year, educators spent approximately $1.5 billion of their own money on classroom supplies, instructional materials, books for their classroom and professional development, according to the marketing company SheerID.  A study by Education Market, an organization that represents retailers of classroom supplies, found that 99.5 percent of all public school teachers spent some amount of out of pocket money for supplies for their students and classrooms. 

Even when they must sacrifice their own personal needs to cover the cost of materials and supplies, educators do so to ensure their students have what they need to succeed. Ongoing professional development is important for the same reason—it keeps educators’ skills and knowledge up to date so they can prepare their students to meet the challenges of our rapidly changing world.

Qualified Zone Academy Bond program

We urge you to support extension of the QZAB program with a reduction in the private match requirement from 10 percent to 5 percent, which was included in the bill passed by the Senate Finance Committee. Too many of today’s students are housed in yesterday’s buildings with out-of-date technology and often unsafe, crumbling infrastructures. More than 40 years old on average, our nation’s public schools could need as much as $197 billion in repairs and upgrades according to the National Center for Education Statistics.

The QZAB program has proven to be an efficient and cost-effective way to help disadvantaged communities address pressing renovation and repair needs. QZABs assist school districts in rural and urban communities by providing a financing mechanism to renovate buildings and invest in equipment and technology. Investors receive a federal tax credit equal to the amount of interest payable on the bonds, thereby relieving local taxpayers and municipalities of the interest burden. A school that is awarded a QZAB may use the funds to renovate and repair buildings, invest in equipment, and update technology which are all vital to student well-being and success.

Full repeal of the “excise tax”

We urge you to include a full repeal of the 40 percent excise tax provision of the Affordable Care Act (ACA) in the tax extenders package. A recent vote on S. Amendment 2882, to the Senate ACA Reconciliation bill (H.R. 3762), to fully repeal the excise tax passed by a vote of 90 – 10, sending a strong message to the rest of Congress that relief for the excise tax should be provided immediately. The excise tax provision of the ACA which will go into effect in 2018 - a 40 percent tax on the cost of employer-sponsored health coverage that exceeds certain amounts, generally $10,200 for individual coverage and $27,500 for family coverage - is often thought to only affect high-end and overly-generous health plans. In reality, however, this tax will have an indiscriminate impact on a broad range of individuals and families who, for reasons they cannot control, have health plan premiums that already or soon will reach the tax’s cost thresholds.

Over the course of their careers, many public education employees have traded salary increases for the long-term security of a comprehensive health plan and have paid their share of their premiums.  For employers to tell hard-working educators now that their benefits will be cut or they will have to pay whatever excise taxes are due would unfairly penalize them.  A report produced by the actuarial firm Milliman finds that although the excise tax is often referred to as a tax on overly-generous health benefits, it’s likely to be a tax driven by other things— factors such as age, gender, and geography, which can have a much greater influence on the cost of a plan than the plan’s benefit structure. 

Employers are already enacting measures to avoid potential tax liabilities by cutting benefits, which will likely manifest in the form of increased deductibles, copays, and coinsurance or passing the tax liability to employees—even though the law doesn’t hold employees responsible for paying the tax. We believe repealing the excise tax is an important and necessary improvement to the Affordable Care Act, a law we strongly support, and we urge you to include it as part of the tax extenders package.

On behalf of our nation’s students and educators, we urge you to support extension of the educator tax deduction, QZAB program, and full repeal of the excise tax provision of the Affordable Care Act.

Sincerely,

Mary Kusler

Director of Government Relations