Washington, D.C. – U.S. Senators Catherine Cortez Masto (D-Nev.) and Jeff Flake (R-Ariz.) introduced the Upward Mobility Enhancement Act to give tax breaks to students whose employers are providing educational assistance benefits to help cover the cost of their pursuit of higher education. By eliminating a tax penalty that discourages employees from taking advantage of those benefits, this bill would offer employers a tool to attract and retain a skilled workforce.
“Education costs have increased by nearly 700% over the past forty years, but our tax code has not been updated to reflect this change,” said Cortez Masto. “I am proud to introduce the Upward Mobility Enhancement Act because it would modernize the tax code and make it easier for employers to recruit qualified candidates. Most importantly, it would give more Americans the opportunity to achieve their educational goals. This bill is an important first step in our fight to ensure that all Americans have the tools they need to pursue their dreams and attain a better life for themselves and their families.”
“As a company that provides thousands of baristas full tuition coverage in their pursuit of a college degree through the Starbucks College Achievement Plan, we believe hard-working students should not be penalized for taking full advantage of benefits from responsible employers,” said John Kelly, senior vice president, Global Public Affairs & Social Impact at Starbucks. “We applaud Senators Cortez Masto and Flake for taking the lead in making working students a top priority for tax reform, and for introducing legislation which will help millions of Americans pursue their dreams of a college degree.”
“College affordability is one the biggest barriers for college participation among Nevada’s students. With the growing number of working students throughout the Nevada System of Higher Education, The Upward Mobility Enhancement Act is an important tool to reduce student debt and ultimately, promote student success,” said Thom Reilly, Chancellor of the Nevada System of Higher Education. “We appreciate the efforts of Senators Cortez Masto and Flake and employers who are addressing the financial barriers facing America’s college students.”
Kathleen Coulombe, Senior Advisor, Government Relations for the Society for Human Resource Management, also voiced support, saying, “On behalf of the Coalition to Preserve Employer Provided Education Assistance and our 85 members, we commend Senators Flake and Cortez Masto for their leadership on The Upward Mobility Enhancement Act. The limit employers are able to provide their employees for education assistance has not be increased in nearly 40 years and in that time, the allowable amount has not kept up with the current cost of education. This important legislation now provides employers with an important tool for furthering higher education, allowing employers to attract the best employees, and building an educated workforce to continue to position the U.S. economy to compete globally.”
Under current law, if an employer provides more than $5,250 in tuition assistance benefits, the employee is required to pay taxes on all benefits above that threshold. This threshold was last updated in 1978, when $5,250 was enough to cover the annual cost of college tuition. This threshold now functions as a tax penalty that discourages employees from taking full advantage of employer-provided educational assistance provision.
The Upward Mobility Enhancement Act ends this penalty by updating Section 127 of the Internal Revenue Code to reflect higher tuition costs. Under the revised code, students could use up to $11,500 in educational assistance benefits without having to pay additional taxes.
Many organizations have already successfully implemented tuition assistance benefits programs. One notable example is the Starbucks College Achievement Plan, which covers the cost of tuition at Arizona State University’s online bachelor’s degree program for U.S.-based, benefits-eligible employees. This bill would encourage more companies to follow Starbucks’ lead in using these programs as a recruiting tool.