The new tax bill, signed into law late last year, has cuts for Americans across the board, especially those at the top. Will this help families to afford Malvern in the years to come?

The Republicans recently passed a shiny new tax code called the Tax Cuts and Jobs Act on December 22, 2017. The bill contains tax cuts across all brackets, slashes the corporate tax rate from 35% to 21%, and eliminates the penalty to not buy health insurance.

Sure, that sounds cool and all, but what does it actually mean for Malvern families? Well, there are a few caveats in the bill people may want to pay attention to.

The first is that the bill will indeed likely lower the tax rate for Malvern families as the bill cuts taxes for top wage earners. The average household income of a Malvern family is estimated to be $311,125, according to an optional, self-reported survey of current parents done by The Fidelum Group in 2015, so Malvern families are on the more affluent end.

According to the New York Times, a family of four with income between $200k and $350k that took the standard deduction of $24,000 would receive savings of between $7,910 and $11,980. However, this tax cut for families will need to be renewed by 2026 according to CNN.

“The new tax bill lowers income rates for top wage-earners,” Director of Human Resources Mrs. Neha Morrison said. “So, potentially, those Malvern families that fit within this category should see a tax break during this period.”

This would free up more money for families to pay Malvern’s increasing tuition, which is $33,400 for the Upper School, $28,975 for the sixth Grade, $29,275 for the seventh grade, and $29,475 for the eighth grade for the 2018-2019 school year as reported on its website.

The corporate tax rate slash for big businesses also could help Malvern families as well. Republicans think the new bill could increase worker’s take-home pay by early February according to the Wall Street Journal. AP Economics teacher Mr. John Ostick agrees.

“A faculty or staff members could go out and buy more things at the store now, which will signal more jobs and that’s how it’s created—by spending programs that lower taxes to households,” Ostick said.

Ostick does not think the corporate tax cut will affect Malvern’s finances directly since they are a non-profit organization. However, he thinks it will impact them indirectly.

“If someone who sends their sons here owns a business, and they get a corporate tax break, maybe it’ll make it easier for them to pay tuition to Malvern Prep,” Ostick said. “So Malvern Prep can benefit from the increase in customers which could mean we could get by without having to increase the tuition as much by getting more funds coming in other than tuition.”

[perfectpullquote align=”right” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]“When there is a tax cut, I always tell my students, ‘Before you clap, which programs are going to be compensated?’ Because all things being equal, if there is less money coming in [through taxes], you need to reduce government spending elsewhere.”

-Mr. John Ostick[/perfectpullquote]

Parent Mr. Chris Preston who is the Head Of Emerging Markets Trading and Operations at the investment firm P-Solve LLC said the tax bill will positively affect his company.

“It affects my firm in the fact that the money saved in taxes will be used to retain talent with higher wages and also hire more people to expand our distribution efforts,” Preston said.

Another element to the tax bill is the expansion of 529 accounts to help pay for private schools. 529 accounts are essentially an investment account that allows college savings to grow tax-free. The new bill expands these accounts to include private and elementary high schools according to Business Insider. This could mean families can take out up to $10,000 a year to help pay for a private school education.

This applies to more affluent families like ones at Malvern and other private schools who can afford to start saving earlier during elementary school. $10,000 a year indeed could help Malvern families pay for the education.

“If I knew that I could contribute to a tax beneficial education saving plan and use up to $10,000/year for elementary and secondary education, I would certainly have taken advantage of it,” alumni parent Mrs. Barbara McDonald said.

However, with the tax cuts, there may be consequences. The bill on net would increase deficits by an estimated $1.46 trillion over a decade, according to the nonpartisan Joint Committee on Taxation. That number would be even higher if the bill is renewed by 2025.

“It’s a serious issue on how our future generations will deal with any subsequent resulting deficit,” Morrison said.

Government programs most likely will be cut as well. It remains to be seen which of these programs are first to go.

“When there is a tax cut, I always tell my students, ‘Before you clap, which programs are going to be compensated?’” Ostick said. “Because all things being equal, if there is less money coming in [through taxes], you need to reduce government spending elsewhere.”

Ostick fears public cultural centers may get cut in low income areas.

“When there’s a problem with the budget usually it’s the library, usually it’s the fine arts, usually it’s the swimming pools and recreation centers,” Ostick said.

McDonald is worried that the tax cut may add to the already huge national debt.

“Unfortunately, when you reduce the amount of revenue or money coming in, then you have to cut costs to offset the reduction or you will increase the budget shortfall which is financed through debt,” McDonald said.

McDonald does not think her family will be better off due to the new tax bill because the standard deduction is going to be raised.

“Although the standard deduction is being increased to $24,000 which will help many taxpayers, the deduction for state and local taxes paid (state and local income taxes and real estate taxes) is limited to $10,000,” McDonald said. “In addition, personal exemptions, which were $4,050 for taxpayers and for most children still being supported by their parents, have been removed.”

Since the standard deduction is raised, there is less of a chance people would be able to get itemized deductions because the standard is so high. The way people could add to their itemized deduction is through charitable donations, but now some Malvern families may be deterred to donate. But the benefit is still there.

Ostick explained that the tax bill could go either way in its results for Malvern families, but he said the results of this tax cut are yet to be seen.

“If this tax cut, for the long run, stimulates economic growth, and does trickle down with higher wages and more jobs, that would be a wonderful result of the tax cut,” Ostick said.