If the controversial GOP tax bill passes Congress, UW-Madison could lose significant money used for scholarships for low-income students.
The Senate version of the tax bill includes a provision that would make revenue earned from university merchandise and apparel taxable. Since that money, which UW-Madison rakes in from Badger gear, is used for scholarships, Chancellor Rebecca Blank has expressed concern over the provision.
Blank, in a letter to U.S. Sen. Tammy Baldwin, D-Wis., said the provision would “increase costs and regulatory burden on UW-Madison.”
“For UW-Madison, this provision alone means $1-2 million annually that currently support students would become taxable income and therefore reduce the amount available for scholarships,” Blank wrote in the letter.
The bill’s language, which is not included in the House version of the legislation, classifies university merchandise sales as separate from the school’s charitable mission, a change from current policy.
UW-Madison gets significant funds from its gear, at least compared to many other universities. The school ranks third in the Big Ten in merchandise revenue and 12th among all colleges. The bill would conceivably hurt other UW System schools as well, but they take in a fraction of the merchandise profits that UW-Madison does.
The bill proposes a 20 percent tax rate for university merchandise, which works out to roughly $880,000 in taxes for UW-Madison. Last year, about $2 million from merchandise went toward financial aid and scholarships, and roughly an additional $2 million went to the athletic department. The tax, if implemented, would take away a significant portion of the revenue from sales.
Blank also mentioned other perceived problems with both the Senate and House versions of the tax bill. For one, she said the proposal to eliminate advance refunding bonds, “an important financing tool UW-Madison uses to refinance our outstanding debt at lower interest rates,” would have an adverse effect on the school.
“Our last two ‘refundings’ will result in about $7.5 million, and $7.7 million, respectively, in savings over the next 20 years — or about $760,000 per year. Savings like these allow us to avoid increasing student fees that help finance campus construction projects,” Blank wrote.
The House version of the bill passed with support from most Republicans and no Democrats. The Senate bill, with the merchandise provision, is likely to see a vote soon — if it passes, the two houses will work together to create a reconciled bill.