
GOP tax bill would tax tuition waivers for grad students - stochastic_monk
http://www.chronicle.com/article/Republican-Tax-Proposal-Gets/241662
======
gervase
Just to put this into perspective, as a graduate student with 2 kids, this
would shift my effective tax rate from 8.4% to 37.0%. As graduate student
stipends are already minimal, this would make remaining in my program
financially impossible; I assume many other students would be in the same
position.

It's also important to note that this would only affect in-demand programs who
can afford to pay stipends and provide waivers (engineering, computer science,
etc); we're not talking about disincentivizing future history professors (who
generally pay their own way with loans), but high-performing engineers working
on challenging topics.

This change will absolutely not increase tax revenue; it _might_ incentivize
schools to reduce tuition costs (a laudable goal). More likely, it will drive
citizens out of graduate programs (where we already make up a single-digit
percent), and further promote graduate school as a pathway towards citizenship
(as this latter group is extremely price-insensitive).

~~~
masonic

       this would shift my effective tax rate from 8.4% to 37.0%
    

Do you understand the difference between _marginal_ tax rate and _overall_ tax
rate?

~~~
throwawayjava
As far as I can tell, parent's use of "effective tax rate" is correct (the
tuition waiver is not income in any meaningful sense -- especially for phd
students who aren't even taking courses). So I'm not really sure what your
point is?

~~~
masonic
Assuming his numbers were accurate, that tax rate is on _each additional
dollar_ of income, _not on the total_.

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nostromo
If you ever wonder, "why is the tax code so complicated?" this is the answer.

Every time there is a proposal to eliminate a specific deduction, credit, or
loophole, special interest groups crawl out of the woodwork to fight it tooth
and nail.

~~~
leggomylibro
How about the estate tax loophole? We've got better places to go looking.

~~~
drawkbox
Gifting when alive you are taxed at 15k+ or so.

Gifting when dead you aren't taxed until 5m or 10m for married. The GOP tax
plan doubles that to 10/20m and then removes it after 6 years.

The estate tax was already a huge benefit when compared to the gift tax. What
would be nice is if they could up the amount on the gift tax rate if they
aren't going to collect any tax on gifting after death (inheritance). This
could free up money that will only be in an estate and not used for years
maybe even decades.

When you compare the gift tax when alive to the gift tax after death (the
estate tax) it is already a _massive_ benefit.

~~~
tssva
There is a lifetime $5.49 million exemption from the gift tax. Gifts above
$14k are taxed. If you gave me $30k this year, you would not have to pay any
taxes on it but your $5.49 million lifetime exemption would be reduced by
$16k.

~~~
drawkbox
Wow never knew that. I always thought the person receiving the gift had to pay
taxes on any amount above the gift tax rate per year if the tax wasn't paid by
the giver i.e. 14k currently.

Basically then any money you receive or earn is taxable except loans and gifts
up to the gift tax limit, all other money movement is taxed.

Of course winnings are still taxed at normal rates because that is income not
gifted per se, I guess I was conflating the two. Example: If you win a car you
owe taxes on the whole thing.

So essentially it is the same limit as the estate tax, so I wonder if that
also doubles and also goes away in the tax bill.

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jdavis703
Let me preface this by seeing I'm usually against tax cuts, and every single
California tax increase proposition that I've come across I've voted for.

That said, I'd be all in favor of eliminating all these special tax deductions
in favor of reducing taxes if it streamlines the federal tax code and prevents
tax dodging and cheating. The idea of using taxes as a stick and carrot just
leads to abuses (at least the carrot side of things).

Taxes should mainly be used to fund the government, and ensure that things
with huge negative externalities (e.g. smoking, environmental pollution, etc)
are paid for. Taxes themselves shouldn't be part of a giveaway. If we need to
direct funds to a certain part of the economy the government should just do it
in a transparent way, such as offering grants to graduate students.

~~~
seanmcdirmid
Having had a tuition waver before, there was absolutely nothing to report (no
money paid, no money taxed), it most definitely had no impact on tax filing
complexity. What they are proposing is to make tuition wavers a “real thing”
rather than something that just existed on paper in a university somewhere,
that is bound to make life much more complicated. It will also probably
completely restructure graduate education in the USA, since many grad students
have free take no classes and rather take 9 credits if “independent research”,
which basically means they get to work in a lab.

~~~
Fomite
And it is _important_ that grad students be enrolled in classes, even if
they're 9 credits of independent research. Student loans, insurance, etc.
depends on maintaining student status.

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geebee
I wonder if this is the first salvo in a renewed attack on universities from
the right. Sentiment toward universities shifted very recently, with a
majority of republicans now saying that universities are, on the balance, bad
for America.

[http://www.newsweek.com/republicans-believe-college-
educatio...](http://www.newsweek.com/republicans-believe-college-education-
bad-america-donald-trump-media-fake-news-634474)

This is interesting, in part, because universities have been left leaning
places for some time, and republicans until recently still saw them as a net
positive.

Universities are a net positive, of course - the research at universities is
amazingly valuable. UCSF has a negative effect on America? Woah. Do they
actually know what goes on in the chemistry, CS, or physics department at
Berkeley?

Unfortunately, I believe that there is some merit to the notion that
universities are becoming intolerant and actively hostile places toward
conservatives and republicans, though I am neither, myself. And that stuff
makes for great headlines - I can believe that something has been blown out of
proportion on Fox News while agreeing that it is a legitimate concern.

~~~
jfnixon
Major universities are basically investment funds that maintain a side
business in education for the tax break. Sure, exempt actual research (the PI,
the lab, the grad students) and actual education (professors, classroom
physical plant) but tax the endowment, the administration, the sports
facilities, and so forth.

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Fomite
Why these exist:

These are indeed waivers - generally speaking, they're used for three things:

1\. To prevent the state from paying the state to educate a graduate student
by waiving tuition that would be paid from a stipend, etc.

2\. To acknowledge that graduate students must remain enrolled in a program
for several years while working on research, but aren't taking classes and
probably shouldn't be paying tuition. reply

3\. To partially adjust graduate students who have no chance of getting in-
state tuition (i.e. foreign students) to the in-state rate so that it's
possible to recruit grad students.

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matt_wulfeck
Any time you hear about some new deduction going away (such as this), ask
"Does doubling the standard deduction create a net positive affect for person
X?"

Almost always the answer will be yes. We need a simpler tax system. This is
coming from someone who will be net-negative from these changes. I can't help
but support it.

~~~
pishpash
The proposals that have so far come out are not substantially simpler. It's a
little redistribution here and there but not nearly dramatic enough to be
called a "simpler tax system."

~~~
matt_wulfeck
I agree in part, mostly because I think calling it "tax cuts" is misleading
since what is really being cut?

That being said, it's easy to predict the number of people taking the standard
deduction is going to go way up.

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chiefalchemist
The irony is that all these efforts to make higher edu more affordable
actually drive up the price.

Yes higher edu should be accessable. However, that doesn't mean everyone is
higher edu material. Again, prices increase along with demand.

Perhaps I missed it but the article doesn't mention the quality of higher edu,
just the quantity. Less students means lower revenue, lower alumi fund, etc.

All that said, it's only a matter of time before the higher edu system is
(pardon me) disrupted. In ten years time these deductions are likely to be
close to meaningless anyway.

~~~
Fomite
These are not about subsidizing higher education. These are _entirely_ about
correcting an administrative issue where grad students need to be enrolled in
classes, but are not taking up the resources that tuition is supposed to
cover.

~~~
chiefalchemist
Can you elaborate? I don't understand the problem.

Also, if these goes to students for edu, how is that not a form of subsidy?
I'm not being snarky. I just don't - yet? - follow your reasoning.

~~~
mattkrause
Most PhD courses are essentially book-keeping exercises like "Preparing for
Qualifying Exams" or "Dissertation Research." These classes, which have no
instructor and never actually meet; they exist to maintain the students'
"student status" so they can get a degree, remain on health insurance, etc.
They're worth much closer to $4/yr than $40k/yr.

That said, I do (slightly) disagree with @Fomite. These high (nominal) tuition
rates do subsidize the university because they can be charged to outside
funders, but this is very, very different from subsidizing the students
directly.

The idea that graduate students are receiving too much largesse at the tax
payer expense, though, would be hilarious if it weren't so scary.

~~~
Fomite
I honestly agree with your middle sentence - it can be used to make outside
funders cover students (though I'd argue part of this is actually correct, as
there's no promise a funded student is in the 'pure research' phase - indeed,
none of the three students funded on my current grants are).

------
geebee
This is interesting. Universities with extremely large endowments (Stanford,
Harvard, quite a few others) don't really need to charge tuition, even at the
undergrad level. And as far as I can cell, most PhD students don't pay
tuition.

So, what stops Harvard from setting a zero tuition for graduate PhD students?
In many fields, STEM especially, grad students are really valuable for the
extremely inexpensive labor they provide, not for tuition checks.

Public universities typically charge lower tuitions, and even then (well, at
Berkeley at least), my experience was that it isn't hard to get a tuition
waiver and become a TA or RA. So, just do away with graduate tuition for PhD
students.

The big casualty, I suppose, would be academic masters students, since those
degrees actually are tuition based cash cows for universities, including
Stanford. Corporations typically underwrite the tuition, and the students are
pretty low maintenance. But I suppose they could create an M.Eng for the
corporate students, and an M.S. for the academic students, and charge higher
tuition for the corporate program.

Another factor, I suppose, is law, MBA, or Med students who get tuition
waivers. Not sure what they'd do about that.

Just a couple of thoughts, but my guess is that the top privates will find a
way around this.

~~~
mattkrause
Most PhD students don't pay tuition _out of pocket_ , but someone usually pays
tuition on their behalf.

For example, my first two years of grad school were covered by an
institutional training grant, which paid for my tuition, stipend, and books.
The next year was paid for by private fellowship (thanks, Pfizer), which
covered pretty much the same things--and a very large coffee mug that I still
haven. Subsequent years were paid for by a combination of other training
grants to the university and research grants to my advisor.

This adds up to some decent money for the university, especially since PhD
students typically take only a handful of classes–and these seminars are
fairly cheap to put on.

~~~
geebee
Now that makes sense - PhD students may be paid out of grants that come from a
source other than the university itself or the student. So that would be a
source of income lost.

~~~
mattkrause
"may" is even a bit soft: I would bet that >75% of biomed PhD students are
funded by some sort of external source.

My impression is that the humanities are a bit different: grad students are
funded by the university, but also expected to do more TAing (etc).

~~~
geebee
Do you think the grant could go directly to fund research, with the university
then funding a grad student with the grant money as a condition of how the
grant is used? Or does it have to go through the grad student as a reportable
tuition waiver?

I certainly do agree this sounds like a much more complicated problem than a
line item that can be hidden when things are internal. Just wondering what
loopholes might work.

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WalterBright
My brilliant proposal is to reduce taxes on productive activities like
investments and working, and increase taxes on counter-productive activities
like emitting pollution.

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ineedasername
So they get a waiver for $40k in tuition, get taxed at 15% for a $6,000 hit.
Maybe make $10k in actual money from a job, if they work at all, for a total
tax burden of $7500 against a tangible income of $10k. Lovely.

~~~
jfnixon
Put the universities on the hook for that $6K. Universities make a killing off
grad student labor. Make the university pay the piper.

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leggomylibro
Slice those without money to the bone, and give more to those who have it.

Typical, really. Grad students really get a raw deal already, and rarely
receive more than a stipend for the crazy hours they put in trying to further
education and the sum total of human knowledge. But let's make life harder on
them; shame, shame, shame...

------
jostmey
Universities are abusing this tax waiver and treating graduate student has
employees. It is high time this waiver be removed

~~~
pishpash
Then make universities pay this tax, not graduate students.

~~~
mattkrause
The universities also don't pay many of the grad students, particularly in the
sciences.

Instead, the students are funded by training grants (to the department or
program), and as RAs on grants to individual faculty members. These
overwhelmingly come from federal sources, so the net impact on the budget is
likely to be zero: these grants would need to increase to cover the taxes,
which would then go right back to the feds.

I could get behind funding _fewer_ grad students and using that money to
actually _do_ some research instead, but I think asking grad students to
absorb a $3,000 pay cut on a $20-30k salary is pretty harsh, especially since
many of the "tuition" payments don't cover an actual class.

------
crb002
Should be for undergrads too then; even student athletes. Right now rich
schools like Harvard have legacy students massively subsidized with all the
tax waivers. Seeing the sticker shock will drive down obscene professor pay
over $100k, make University much more affordable.

------
darawk
Good. If you want to subsidize education (or any activity), write a check,
don't complicate the tax code.

~~~
Fomite
This isn't a subsidy. It's a correction for a required administrative process.

~~~
darawk
> In broad terms, the bill would eliminate or consolidate a number of tax
> deductions meant to offset the costs of higher education for individuals and
> companies, including the Lifetime Learning Credit, which provides a tax
> deduction of up to $2,000 for tuition, a credit for student-loan interest,
> and a $5,250 corporate deduction for education-assistance plans.

Sounds like a subsidy to me.

~~~
Fomite
The waivers aren't a subsidy.

~~~
darawk
The bill proposes taxing them. The waivers are a gift that has value. Not
taxing them is the same as subsidizing them.

~~~
Fomite
A mandatory gift that is of no material benefit to the student that is
generated as an administrative process is not the kind of gift that should be
taxed.

This would be like taxing you because I asked you to hold onto a $20 bill for
me while I reshuffled my wallet.

~~~
darawk
It's barter. The students are trading their time for an education. That is a
value transfer. There is nothing mandatory about it. Each party is
consensually entering into an agreement to transfer services that have non-
trivial value. If you could simply escape taxation by bartering, you'd see a
lot more bartering. But you don't, because barter is still legally taxable.

~~~
throwawayjava
No. As noted elsewhere, no education is provided through 90% of these courses.
They meet zero times per week and have no real instructor. They are a book
keeping exercise so that PhD students are still technically students while
working in the lab, not an actual tangible educational course.

This is a just a significant decrease in research funding that is, by default
at least, implemented as a substantial tax increase on grad students (those
bastards...?), who now pay tax on 40k/year of tuition for literally imaginary
courses.

I agree the situation is awkward and stupid, but the material effect is what
matters. Without a corresponding increase in science and education funding
this is basically an enormous cut to science funding and undergraduate
education funding. And it's one that is by default shouldered exclusively by
people making 20k / year.

~~~
darawk
If it has no value, then there is no value to waive. If there is no value to
waive, there is no value transfer. Either they should pay taxes on it, or the
university should stop 'waiving' tuition and simply make it 'free'. What
absolutely should _not_ happen is a special entry in our tax policy for this
perverted case.

If it is indeed simply a 'book keeping' exercise, then what it really is is an
attempt to subvert some _other_ policy. I'm not sure what that policy might be
(student loan terms, perhaps?) But whatever it is, it's that policy that
should change. Not tax policy.

~~~
Fomite
> If it is indeed simply a 'book keeping' exercise, then what it really is is
> an attempt to subvert some other policy. I'm not sure what that policy might
> be (student loan terms, perhaps?) But whatever it is, it's that policy that
> should change. Not tax policy.

It's an attempt to recognize the problem of needing students to be fully
enrolled _to be defined as students_ often by _law_.

It's far easier to put in a tax waiver to take care of the consequences of
that than it is to change that policy, at a state level, and figure out all
the downstream issues of that - which will _also_ probably impact the tax
code.

~~~
darawk
Exactly. And why do they need to be defined as students by law?

~~~
Fomite
For one thing, so they can be eligible for student services like health care.
So student loan repayments don't trigger while they're still in school. Any
international student on a student visa. Accurate tracking of which professors
go to which graduate students, and the means to record their progress.

And that's just off the top of my head.

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kapauldo
They don't believe education should be incentivized. Bizarre that smart people
voted for him.

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pishpash
"The plan would also tax the tuition waivers that many graduate students
receive when they work as teaching assistants or researchers."

This is f-ed up, graduate students don't ever see a red cent from tuition
payment from RA and TA grants, which is an accounting manipulation by
universities.

------
kchoudhu
I'd be okay with this -- if they made universities pay into FICA for the
taxable amount.

------
joelrunyon
"Waivers" __

~~~
stochastic_monk
Thanks! Corrected.

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harmlessposter
This is great. We need to destroy the academia scam.

~~~
Fomite
By penalizing the people in academia who are the most vulnerable.

~~~
harmlessposter
Destroy the pyramid scheme by ripping out the base of the pyramid. Sounds good
to me.

~~~
Fomite
It sounds cruel, petty, and ultimately pointless to me.

