Whether it's a flaw or a feature, it needs to be fixed asap:
A little-noticed provision in President Trump’s sprawling new tax law is treating middle- and low-income college students as if they are trust-fund babies, taxing sizable financial aid packages at a rate first established 33 years ago to prevent wealthy parents from funneling money to their children to lower their tax burdens.
Students with large financial aid packages are finding their nontuition assistance for items such as room and board taxed by as much as 37 percent, even if their family income tax rates are much lower.
Do the math. A poor kid receiving $11,000 a year for room and board is coughing up $4,000 of that in taxes. If that's "winning" I'd hate to see what happens when we start losing. This should not have come as such a surprise to lawmakers, because they've already been raked over the coals for over-taxing survivor benefits for Gold Star families:
The so-called kiddie tax rate was established specifically to address generational transfers used by rich parents to lower their tax burdens, but in the name of tax-code simplification, the Republican tax law expanded its reach. It is now hitting tribal funds dispensed to Native American children and young adults, and the families of service members who died in combat, some of whom saw hefty tax bills for their children’s survivor benefits this past spring.
A bipartisan effort, led by Representative Elaine Luria, Democrat of Virginia and a Navy veteran, would fix the tax law to classify survivor benefits as earned income.
“Democrats and Republicans agree — we must fix a broken system and ensure Gold Star families are not victims of a tax hike,” Ms. Luria said in a statement.
But a legislative fix to other targets is less far along.
And it shouldn't be. Whenever there's a broad change like this, other groups are equally affected. An effort to rescue just one of those groups while ignoring the others is not only morally flawed, it's inefficient as hell. Find the root of the problem, and yank it out.