Bipartisanship Breaks Out In Ohio House: Lawmakers Aim To Scrap Income Tax On College Financial Aid


Cross posted for OhioDaily’s Bill Sloat at The Daily Bellwether
Sounds like a silly quirk in the income tax rules that needed reform. Ohio is making residents who receive federal and state college-assistance grants pay incomes taxes on the money that is spent for room, board and meal plans. Books and tuition are exempt. The room and board tax takes cash away from families who have shown in grant applications they need every cent possible for their college education. Two state reps, Democrat Dale Mallory of Cincinnati and Republican Timothy Derickson of Oxford, have proposed a targeted cut that ends the income tax on federal Pell Grants and Ohio College Opportunity Grants.

House Bill 419 was filed this week and already has drawn broad support — 14 Republicans and 13 Democrats are signed on as cosponsors. Derickson has told lawmakers that students don’t have any say in how the grants are administered by the colleges, which means they don’t get to choose if their aid package is used on tuition or fees for room and board. Lawmakers said the targeted tax cut would not take much of an impact on the state budget, but would help students and their families whittle down college costs.

Pell grants are based on income levels, the lower the income the more the grant. At the University of Cincinnati, the financial aid office reports Pell Grants range from $976 to $5,350. College Opportunity grants range from $1,008 at state campuses to $2,256 at private schools.

While lawmakers are moving in the right direction with HB 419, they ought to consider taking another whack at the tax code: Dump the sales tax on college textbooks. Students who buy over the Internet don’t pay the sale tax. Those who buy at the bookstores on campus or off-campus are charged 6.5% of the sales price in Hamilton County (it would vary county to county across Ohio). In Cincinnati, for example, $400 worth of textbooks comes with $26 in sales taxes. Over the course of four years to a degree, sales taxes could reach $300, and probably more. Repealing the sales tax would be a boost to level the field between local booksellers and their Internet competitors (good for businesses here), and would help students and their families by reducing college costs.