Proposed Tax Law Would Hurt Graduate Students

Originally published in Ha’am.

Paying for school might be a lot tougher for graduate students thanks to the “Tax Cuts and Jobs Act” (TCJA) making its way through Congress. The bill has come under fire by opponents for a plethora of issues, including projected increases in the number of uninsured Americans, nine-digit increases to the federal budget deficit, higher costs of insurance and, in California, de facto increases in insurance caused by removal of deductions for state tax.

Many have criticized the bill for its apparent benefits to wealthy Americans, including drastic cuts in the corporate tax rate and provisions that would make the purchase and maintenance of a private jet tax-friendly.

For grad students, like many non-private-jet-owning Americans, all of the above are concerning stipulations that will make it harder to exist in the Middle Class. But the issues for graduate students cut straight to the day-to-day experience of pursing a master’s or doctorate degree.

In short, graduate students receiving tuition waivers (through employment as Teaching Assistants or Researchers) would now be taxed on the money used to waive that tuition. A UCLA Teaching Assistant (TA) working at 25 percent time would receive $5,482.09 in tuition remission and a nominal salary for that quarter’s work. The salary is and has always been taxable income (as it should be), but the $5,000-and-change is money the student never gets to see.

The Tax Cuts and Job Act would tax students on that tuition waiver/fee remission money. That is unfair, and could prove costly to students pursuing graduate degrees.

It’s even worse for Ph.D. students, as the sticker price for tuition is often very high nominally, even though nobody ever pays that sticker price. At UCLA, base tuition is the same for Ph.D. students as for Master’s students, but for a student with completely waived tuition, that just means a higher number to be taxed on. Worst off of all are out-of-state students who have their non-resident supplemental tuitions waived; they, too, will have to pay taxes on money they never see.

The new tax provisions resemble a student leaving their wallet at home, getting a free cup of coffee with the Starbucks app, and then being asked to cover the tax. This would make sense if the app sent you a couple of bucks and you paid for your coffee with cash. But waivers are handled on the back-end, and the TCJA will effectively create a surcharge on graduate education. Students in advanced degree programs may need to take out loans to help cover the cost of school or apply the stipends earned to cover waived tuition — ridiculous, considering the whole point is to reward students for taking on critical TA jobs and research appointments.

Of course, this isn’t a Jewish student-specific issue. But our community is increasingly seeing the benefits of advanced degrees. A 2016 Pew study showed Jews are the most educated religious group, and one from 2015 showed that 31 percent of Jewish Americans have a graduate degree (nearly 60 percent have an undergraduate degree). With the passage of TCJA as-is, thousands of Jews will find their educational pursuits stunted by the repeal of this tax exemption.

A nifty tool developed by UC Berkeley graduate students shows what graduate students might be looking at in terms of the size of increased tax burdens under TCJA. It’s not pretty. In their sample calculations, an MIT student with a tuition sticker price of $50,000 would see their taxes increase by more than $9,000 — though their income would not change. This is a ridiculous imposition on graduate students, and one that cannot possibly be billed as helping them.

Official UCLA Twitter accounts have tweeted using the #GOPTaxScam. That might be dangerous territory for schools which are supposedly nonpartisan. But those accounts are right – it is a scam to call this tax plan anything other than what it is: an unfair, coordinated screw-over of graduate students. But good news for graduate students with private jets — they’ll soon enjoy a nice break in taxes…

Zev Hurwitz is a graduate student in public policy at the UCLA Luskin School of Public Affairs.