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Saturday, April 9, 2022

Increasing teacher's deduction for classroom supplies masks problem rather than fixes it

Most employees don't have to bring their own supplies to work or pay for materials customers need. For example, workers at most places that use cash registers to total up customer purchases are not required to fund and bring their own registers to work. Most employees required to travel for work get reimbursed for that expense.

But K-12 teachers are expected to buy supplies for their workplace and their students and about 94% of public school teachers buy these supplies (U.S. Dept of Education, May 2018). I say "expected" because clearly, most teachers use their own funds to buy supplies and since 2015 there has been a permanent tax rule that allows these teachers to deduct for AGI up to $250 of that spending. An inflation adjustment increases that to $300 starting in 2022. Prior to 2015, the deduction was temporary.

S. 3992, the Educators Expense Deduction Modernization Act of 2022, proposes to increase the $300 per year amount to $1,000. Per Senator Sherrod Brown's April 6 press release, he proposes to quadruple the deduction (using the 2021 and earlier maximum of $250 rather than the 2022 amount of $300). He notes that $250 is "far less than most teachers spend each year out of their own pocket on classroom supplies."

The existence of this deduction and the proposal to increase it seems to take for granted that this is just the way it is. The presumption is that K-12 teachers should be using some of their salary for classroom supplies. This is outrageous! Where is the proposal to better fund K-12 schools so employees don't have to pay for job-related costs?

And, if lawmakers think it is proper to expect school teachers to fund classroom supplies, why not at least change the tax rule from a deduction to a tax credit?  Among states, the average teacher salary ranges from a low of $45K in Mississippi to a high of $87.5K in New York (2019-2020 per Business Insider). 

So, what is the after-tax cost of $300 of classroom supplies (assuming the teacher did not spend more than that) for 2022? Let's assume a single teacher claiming the standard deduction with a salary of $65,000. Taxable income before the deduction is $65,000 - $12,950 standard deduction = $52,050. That amount of taxable income has a marginal tax rate of 22%.  So the $300 deduction saves the teacher $66 of federal taxes and the supplies, in effect, cost $234. That is still a lot. A 50% credit would produce a savings of $150 and a 100% credit would produce a savings of $300 (the federal government would be funding 100% of the cost of the supplies up to the credit maximum).

How much do teachers tend to spend out-of-pocket for classroom supplies? The Department of Education reported for 2014-2015 the average was $478 and the median was $297. A few spent over $1,000.

Worse yet, the Consolidated Appropriations Act 2021 (P.L. 116-260, 12/27/20) modified the deduction to also include COVID-19 protection items teachers purchase for the classroom (Rev. Proc. 2021-15). How many other types of employees are expected to purchase PPE for customers? I find it disappointing that it clearly has become the "norm" to expect that teachers are to personally fund these supplies.

What do you think?


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