The Impact of Tax Reform on Higher Education in New York City

Abstract

In 1986, Congress enacted a reform of the tax system touching almost every segment of society. Marginal tax rates were reduced, numerous deductions were limited or restricted and some activities were made subject to tax for the first time. Tax reform was designed to eliminate loopholes and shelters and since higher education was one of the beneficiaries of these clauses under the old law, it was one of the losers under the new law. The lowering of marginal rates and elimination of the charitable deduction for nonitemizers aggravated matters by hurting charitable giving, an important source of revenue for colleges and universities. Casual analysis thus suggests that institutions of higher education have been hurt by the 1986 Act. This paper will examine this conclusion with regard to the higher education community in the five boroughs of New York City. Using college and university budgets as data, tax reform's impact on revenues and expenditures will be analyzed.

Keywords: tax policy,tax incidence,higher education,New York City,tax reform,TRA 86,Tax Reform Act of 1986,

JEL Classification: H00,H20