Republicans screwing over grad students

For those of you who are in grad school, you’ve likely already heard that the Republicans’ proposed tax plan hurts grad students. Specifically, grad students would be taxed on their tuition waivers. On top of being bad for grad students, it simply doesn’t make sense to me. As far as I’m concerned the tuition waiver is just an exchange of money between the grant providers and my university. I never see the money. So why should I be taxed on it?

I intend to graduate before any of this could possibly affect me personally. But I went ahead and estimated how much additional tax I would have to pay. In 2016 I earned about $33k, and paid $3k in federal taxes. I had a tuition waiver of $13k, so the proposed tax plan would treat my total income as $46k. My marginal tax rate was 15%, so if I paid taxes on the tuition waiver, my taxes would go up from $3k to $5k. Now, I’m omitting some details, as the tax proposal also shuffles around tax brackets and deductions. But some students at UC Berkeley made a calculator, and it comes out the same.

For some grad students it can be even worse. For example, the calculator estimates that for a typical MIT student, taxes would go up by 240%, amounting to more than a third of their true income. The reason is that MIT has a higher tuition than my own public university.

When I looked for news articles on this subject, one big question is, why are universities charging grad students tuition in the first place? It seems that the tuition just determines how much money grant providers pay to the university. Tuition isn’t actually representative of the services I get out of the university. I don’t use the university services the same way undergrads do; for instance, I don’t take classes. In fact, it seems I’m providing a service to the university, what with me doing the kind of research that gives the university its high reputation.  If universities don’t charge professors tuition, then why Ph.D. students?

I’m not really sure what to think about the transaction between the universities and grant providers (in my case, the Department of Energy). Maybe the Department of Energy should implement a cap on how much of their grant can go to tuition, forcing universities to reduce it, I don’t know. But whatever goes on between them, it just makes no sense to tax students over it. If Alice buys something from Bob, you wouldn’t tax Carol.

I can only imagine that in the long run, there will be some creative accounting to get rid of the problem. Or, you know, at least distribute the burden so it isn’t entirely on grad students.  But in the short run? Grad students might get screwed over.

Grad students are in a strange position in society. We’re an elite socioeconomic class, and yet we’re poor. If you’re in favor of more progressive taxes, you might be confused as to which way grad students should go. Here’s how to think about it: We’re “elite” because we’re likely to find high-paying jobs in the future. So the way to deal with grad students is to tax them after they graduate and find high-paying jobs. Not before, when we’re poor.


  1. anothersara says

    I did not know about this specific problem with the Terrible Tax Bill before, but I’m not surprised, since it seems to screw over just about anybody who is not super wealthy (and I’ve read that it accidently screws over some groups of super wealthy people too).

    My knowledge of tax law is out of date, but the principle is that any economic benefit offered by an employer to an employee, even if it’s not money, is part of the employee’s income, unless that economic benefit must be offered to enable the employee to do their duties (of course, being tax law, lawmakers can carve out whatever exceptions to this principle they like. That is why tax accounting makes less sense than any other type of accounting). The classic example is housing. If, say, a tech company owns a condo, and lets one of their programmers live there without paying rent, then the value of that housing is part of the programmer’s taxable income. However, if a hotel requires a hotel manager to stay at the hotel 24/7 so they can respond to emergencies, then the value of the housing the hotel offers the hotel manager would not be part of the manager’s taxable income. Likewise, if a shipping company needs the crew to stay aboard the ship 24/7 during a week long voyage, then the ‘housing’ the crew gets aboard the ship is not part of their taxable income.

    Based on that principle, for tax purposes, it does not matter whether or not the tuition money actually ever goes through the grad student’s hands. The question is whether the tuition waiver is an economic benefit to the student or not, and whether or not the student would still be able to perform their duties without the tuition waiver.

  2. Matthew Herron says

    So the way to deal with grad students is to tax them after they graduate and find high-paying jobs. Not before, when we’re poor.

    I couldn’t agree more. Tax me, and leave my poor grad student alone.
    Offhand, I can’t think of a better way to ensure a long-term economic decline than creating economic incentives against higher education.

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