January 2nd, 2013
On January 1, the outgoing 112th Congress passed HR 8, the “American Taxpayer Relief Act of 2012,” often referred to as the “fiscal cliff” deal. President Obama is expected to sign the bill. Far short of a once contemplated grand bargain on taxes, entitlement spending and deficit reduction, HR 8 primarily focuses on taxes and results in, among other things, higher marginal tax rates for America’s biggest earners. Tax provisions of particular interest to the CSU include a five-year extension of the American Opportunity Tax Credit, which helps middle-class families pay for college; making the student loan interest deduction permanent; and leaving in place the deduction for charitable contributions (albeit with new provisions reducing itemized deductions for taxpayers earning more than $250,000). It also extends through 2013 the deduction for qualified tuition expenses, certain tax-free distributions from IRAs, and a business tax credit for research and experimentation.
Overall though, from the perspective of the higher education community, the bill left much unresolved. It did not deal definitively with sequestration, pending automatic spending cuts set to take effect in the middle of the current fiscal year (FY 2013). These cuts, created by 2011’s Budget Control Act, would hit a vast array of programs across-the-board, threatening CSU priority programs that aid students like Work-Study, SEOG, TRIO, and GEAR UP, as well as capacity building grant programs for minority-serving institutions and research funding in key agencies like NSF and NIH. HR 8 postponed the effective date of sequestration from January 2 until March 1, and made very modest reductions to the total amount of cuts that would be required. But with the nation due to hit its debt ceiling again in early March, temporary FY 13 appropriations set to expire March 27, and ongoing political gridlock in Washington, deep concerns remain about the fate of education and research funding in FY 13 and beyond.