The GOP Tax Plan Will Destroy Graduate Education | Hacker News Reader

The GOP Tax Plan Will Destroy Graduate Education

forbes.com

104 pointschrisgray149797 comments

My alternate headline: GOP Tax Plan will force institutions to alter graduate tuition accounting

Tuition waivers are currently used, especially in the science disciplines, to have outside research grant dollars pay for grad-student tuition. If this tax plan passes, tuition waivers would no longer make sense and the dollars from research grants would need to shift. This probably means lower tuition for certain programs and more money from the research grant going to institutional administrative costs.

Exactly.

Personally, I'd like to see a balanced approach: shift some of the money to increase those laughable stipends into something livable, and put the rest where it belongs: on admin costs.

The shell game universities are playing is part of the problem. Hopefully, if this change makes it into the final bill, Universities do the right thing and don't stick it to their Grad Students.

Why do research grants belong paying admin costs?

I thought they were for, you know, conducting research. (Yet apparently most universities already take something like a 50% cut)

I think the original intent is to pay for overhead (lab space, core labs that provide services, office space, etc.) but maybe the administrative bloat has grown to absorb more research money just as it makes up a large portion of total university expenses.

Can you elaborate more on what is going on at universities?

Are you saying that grant money comes in for research, but gets funneled back to the university through tuition?

The default tax rule in the U.S. is that any benefit you receive, in any form, is earned income and taxable.

Layered atop that default rule are a long list of exceptions, which are generally categorized as (1) exemptions and (2) deductions.

If you attend a Ph.D program where the advertised tuition is $30k per year, and you get a tuition waiver (or w'ever it's called), the default tax rule says that you still earned income because you received a benefit. The nominal value of that benefit is $30k, therefore the student would need to pay taxes on that $30k.

Apparently there's an exemption or deduction that excepts tuition waivers from the default rule, meaning such tuition waivers wouldn't be considered taxable income.

As part of the GOP plan to pay for corporate income tax rate cuts, they must discard many kinds of exemptions and deductions to replace lost revenue from the corporate rate cuts.

To those who say that this is a shell game[1], note that if it was just a shell game then the change wouldn't have been made. In other words, there's an expectation that discarding this exclusion will generate more revenue. That revenue would directly come from students and/or universities, one way or another.

Universities could lower tuition, but one reason for the disparity between nominal tuition and effective tuition is that foreign students disproportionately pay the nominal tuition. Reduce nominal tuition and you reduce the foreign subsidy for domestic students. Not only does the effective price of a graduate education go up, but you're likely to see even more foreign students. Depending on which country you hold citizenship, that's either good for your career prospects or bad for your career prospects.

[1] All the news reports make a point of saying that the university "pays" the tuition waiver. It's a distinction without a difference. The student still derives a benefit, and however the university cares to balance its books (e.g. with double-entry accounting) is entirely irrelevant unless there's incredibly esoteric technical requirement to the particular earned income exception. Such esoteric technical requirements are rare since the 1986 reform as the text of modern rules emphasize underlying economic benefits and not accounting practices, as focusing on the latter create more opportunities for gaming the tax code.

If this goes through, there will be some huge adjustments for graduate students and the research universities that depend on them. With no phase in, this could really hurt current students who thought that they would be getting $15k a year to live on and now have almost nothing, if they have to pay tax on the $30k the university is "giving" them in tuition. If you are have way through a degree program what do you do? Even more student loans?

Or they'll offer 2 "products" from this point forward. One only open to local students and half the price. One open to everyone but full price.

I'm sure accountants can figure this one out.

Many schools already do it with their tuition rates per credit hour: the cheapest rate for city residents, then in-state residents, then out of state students. Adding a fourth tier for foreign students sounds trivial.

Getting rid of exemptions and deductions is also "simplification" and "reform".

I mean, I agree that the plan is focused on paying for corporate and high end tax cuts, but how do you do tax simplification if special interests are all off limits?

You don't. The complexity of the tax code isn't a bug, its a feature because people don't want a simple code, they want a simple code _with_ all the exemptions they're likely to use.

Special interests is just code word for other people's deductions.

The fact of the matter is that the 1986 tax reform _already_ tremendously simplified the tax code. Much of the cynicism about the modern tax code is latent from the 1986 reform effort, when politicians were drumming up support for very difficult changes. Before 1986 individuals could take deductions on interest payments, for example, just like businesses; after 1986 individuals were only left with the mortgage interest deduction. On the other hand, the corporate code was also tremendously simplified, and like I said did away with esoteric technical requirements rife with loopholes. People were willing to give up their exceptions because corporations lost a lot of theirs, and everything at least felt more equitable.

I would argue that the major thrust of the current reform effort is neither simplification nor a quid pro quo. Even with 30 years of accreted deductions, things are incomparable to the pre-1986 system. The major thrust of the current reform effort is simply to shift more of the tax burden from corporate taxes to individual taxes.

I don't know why, but I'm sort of ambivalent about all of this, frankly. Perhaps partly because a significant number of of my yearly deductions are business deductions, which I know the GOP won't touch. I think it's dishonest to sell the current reform as simplification, because while some aspects are being simplified, that's neither the underlying motivation nor design. The thrust of the current reform effort is simply to cut corporate rates and replace that lost revenue with revenue from personal income taxes.

So, for example, personal exemptions are being folded into the standard deduction and sold as a "simplification". But the only reason for doing that is to hide the fact that such a combined deduction will be less than the current standard deduction+exemptions. Those things are separate for a simple reason--the standard deduction is fixed per household, but the personal exemption is per household member. It could have equally been simplified by getting rid of the standard deduction and increasing personal exemptions, but doing that wouldn't have raised revenue. And that's why it's disingenuous to sell this as simplification--the primary purpose is to generate revenue from personal income taxes to offset reductions in corporate income taxes.

There are many reasonable arguments for supporting the GOP tax plan. But people should be wary of rationalizing things in a way that causes them to support or reject the plan even though it fundamentally disagrees with their personal policy preferences.

EDIT: Quote from a 2011 review of the 1986 reform:

  "[The 1986 t]ax reform was not only revenue neutral but also
  roughly distributionally neutral: This tax reform was not to
  become an occasion for significantly shifting the
  distribution of income tax burdens among income classes. So
  distributional neutrality, along with revenue neutrality,
  became guiding principles for the legislation."

Source: http://www.taxhistory.org/www/features.nsf/Articles/066C3B71...

That's correct, part of grant money is allocated to salaries for graduate students and postdocs, sometimes even salaries for the professor himself. The corollary is that any PhD program in the sciences where it's the student who pays the tuition is worthless.

Another part of a research grant goes to the institution, that's the dreaded "indirect costs".

Don’t tuition waivers come out of grant overhead anyways? In that case, the amount of a grant going to research wouldn’t change, just divisions in how the overhead is allocated.

No, it won't. The sensationalism all around is just infuriating; I know it's basically politics in a nutshell, but this sort of crap is getting really old. It's not going to destroy higher education; it might raise the bar a bit of who goes to graduate school, and force schools to do more to entice top tier talent to come to their school, but it's not going to destroy it.

"raise the bar" is a little misleading. It won't raise the bar in terms of talent, it'll raise the bar in terms of how rich your parents need to be.

A bit? I know people whose taxable income would increase by 200% without these waivers. This translates to a tax increase of ~500% and ensures that people making 25k in stipends are paying 15k in federal taxes.

Can you provide any specific details on how the new suggested tax plan will raise the bar? It seems as though we should be encouraging Graduate and PhD students. It seems as though it would force additional students into taking out loans if their tuition is not waived?

If the only thing standing in the way of a student continuing on Graduate or PhD studies is grant money, they shouldn't have trouble finding a job. In that case, if the university wants to attract those students from the private sector, they'll have to find a way to increase a student's stipend to cover these expenses. At top-tier schools where tuition is the highest, their endowment is likely large enough to support this move.

Alternatively, the schools could adjust what they charge students for tuition. As the article states, the cost of a year at Princeton's grad school is $49k/yr. Somehow I suspect that this sticker price is not tied to much in terms of their cost, but if it means charging less to students if that allows them to attract top talent, they could probably do that as well.

In terms of raising the bar, to me this would mean that if graduate schools want top talent, they'll have to find a way to do it: raise the stipend, lower the cost of tuition or something else. In this case, a very bright student who can't afford graduate school will either have to go into industry or the schools will have to find a way to keep them.

On the downside, if we follow the pattern of the last 30 years, the reaction will go something like:

1) Students struggle to afford college tuition

2) Government steps in to make large cheap-ish loans available beyond what might be reasonable ().

3) Students now have access to loans to go to any school they want

4) Colleges notice that they can raise price because students don't price shop

5) Colleges raise their prices

() They're government backed loans that are difficult to discharge, mostly because there is nothing to repossess and interest rates would likely go through the roof if students could graduate and immediately discharge their loans.

> 3) Students now have access to loans to go to any school they want

> 4) Colleges notice that they can raise price because students don't price shop

When has this ever been true. I applied to school many schools back in the day and it usually came down to finance and then reputation. Whichever school granted you the most tuition and living expenses, and wasn't steaming pile of shit is where 99% of my working class peers and I attended.

Speaking only anecdotally, friends who complain the most about college loans are the ones who took out massive (~$100k) loans to go to private schools. With some exceptions, private schools are likely not to be worth the extra money; problem is, loans are due later, but awesome "dream school" is now.

or stop pursuing a graduate degree and go get a job making 30k-50k or more working in industry.

A PhD (and sometimes a postdoc) is a requirement if you want to do more than low pay lab-tech work in some fields, like pharma. In the life sciences a PhD is more of a professional degree.

The misinformation in this thread is astounding. This is targeting graduate student tuition waivers: waivers given to students who are usually also receiving a stipend, who are almost never taking out loans to manage degree costs. It's likely that there is a better way for universities to quantify the net movement of money between student and institution, but to have lowly-paid graduate students bear the brunt of the change is unconscionable.

Uh, it worked the same way for Masters degrees at Wisconsin (source: I have one and this tax "reform" would have screwed me).

I don't understand your undergrad comment, the tax bill doesn't change anything there so far as I know.

You're right, it would've been more accurate to just say "graduate" instead of "PhD", I'll edit it. I don't think I mentioned undergrads though.

I don't understand this. During my PhD my "scholarship" was just basically the university choosing not to charge me money. It's not as though I sat down and set on fire $20k worth of paper every year. So now they have to pay tax on to the amount they would have otherwise charged me? Isn't that kind of a hypothetical concept? Like, can't they say, "Oh the tuition for the civil engineering PhD program is now zero"? Virtually no one in my program had ever paid tuition before.

Maybe what they could do is claim we are first and foremost employees and that the PhD is a certificate of on-the-job training. Presumably they are not going to charge Facebook for the training courses they give their employees.

I've got a PhD in math. I've been wondering this too. I remember that one of the institutions that accepted me, said, in the acceptance letter, that my offer was worth something like $60k a year ($20k in actual stipend and $40k in tuition I wouldn't be paying). That was good for a laugh then, but it would have actual meaning now.

Can't speak to PhDs but for MS programs, the university couldn't charge $0, because they need to charge foreign students exorbitant amounts of money to balance the books.

This is similar in concept to how debt forgiveness works. Generally (there are exceptions), debt that was defaulted on gets taxed as though it was income because it was planned/expected to be income for the creditor, upon which taxes would be paid.

It's also similar to how other non-monetary transactions are treated in the tax code. For example - bartering. Legally, if I agree to fix your roof if you repair my vehicle, that is, under the law, a taxable event. It's just that such things are very hard to enforce in that kind of situation.

This is essentially applying the same concept. It's not hypothetical. Something of value is being received/transferred. That is a taxable event, but here it is much easier to enforce because there are numerous records proving that it occurred.

The proper way to view it is that the university is giving you an "in kind" benefit, in this case a free education. "In kind" benefits are taxable. An employer cannot say, for example, that providing a free apartment to an employee is not compensation, because the employer is "simply choosing not to charge the employee rent."

>The proper way to view it is that the university is giving you an "in kind" benefit, in this case a free education.

Under no circumstances does a company in industry pay an intern $20k/year, "waive" a $40k/year "training fee", and then go to the government and register it as an in-kind benefit. Here in the much-vaunted "real world" outside academia, we may pay trainees and interns less than the full salary, but we don't try to put a tax penalty of half the salary on being an intern.

But obviously this is one variable that can be highly fudged. They can provide apartments at 1/3 the normal cost, but claim to be charging you rent. Or, if you want to go further, have those rooms "available" for guest faculty and you're just holding the key.

Or, well, this is how it's done in some places in Europe, where benefits "in kind" are "taxed". Except they're not taxed. You can't make that happen.

You can fudge a bit but not that much. In an audit, it's pretty easy to notice if your company is leasing out employees an apartment for 1/3 of market rate. Few companies are going to risk tax fraud charges for that. It's particularly difficult in the case (as with universities) where you're literally in the business of selling the same product a particular price to other people.

Yes, during your PhD there were no tax consequences to the university forgiving your tuition, because it was given special consideration.

This would change that.

Ostensibly valuable students will be able to arrange for the university to bear the burden of the taxes, but it will be a change and it is likely that large institutions will use it to their advantage.

No but from an accounting perspective I don’t get how this works. Phd students often do no use any of the univeristy’s real resources. The marginal cost of a phd student is often zero or negative, due to the work they do. There are no platonic costs to charge them, especially if they are passed quals and aren’t taking classes any more. Sure they use their advisor’s time, but that’s unaccountable and variable. So the university could just adjust tuition downward for programs for which everyone gets a scholarship anyway. Is the GOP going to regulate tuition too?

So the university could just adjust tuition downward for programs for which everyone gets a scholarship anyway.

Yes, this is what would happen. They probably couldn't adjust it down to zero as that would trigger a legal challenge from the IRS but they could very likely make it much lower than it is today.

Graduate students cost research groups about as much as postdocs cost, precisely because we're paying the University for the analog of the tuition waiver.

Despite all the comments, it seems hard to gauge what would happen if something this insane were to actually pass.

Hopefully universities would find a way to "creatively adjust" their accounting such that graduate students are paid the same net amount as they were, but universities are big bureaucratic institutions and slow to change or adapt.

I'll only speak to what I know, which is fully-funded PhD programs in STEM. If this change hit students directly, it would be devastating.

If you look at top private institutions in the USA, you might notice that the socioeconomics of the undergrads skew rich-rich-rich but the STEM PhD students come from all walks of life (and countries all over the world). That's because the programs pay them enough to live on, albeit barely in many cases. If that fact goes away, so will the students.

Now maybe universities will be able to adapt and either pay enough to make up for it, or change their accounting. But most likely there will be a dichotomy where the richest and most successful programs have the easiest time negotiating the change while the others get hit hard.

STEM PhD students provide USA universities with inexpensive teaching labor, prestige, future donation revenue, future patent revenue, and the labor to complete research grants. The best research institutions will move quickly to keep the graduate system in place.

I think this is a good thing. Graduate education is grossly overpriced, because institutions know the government will help pickup the tab.

I don't follow your line of thought. How is the government picking up the tab? The government isn't making any payment back to the institution.

I believe what Overtonwindow meant was that the cost of education has gotten out of control primarily because whenever the government guarantees debt (cough housing cough) it creates a perverse incentive where the lenders profit by bigger loan values and the schools profit by jacking up the cost of their service for which the loans are issued.

Essentially, there is far less of a check and balance on the price of the good/service. Whenever you have true cost hidden or put way down the road it tends to significantly increase the total cost. Also, there was a hard limit on the cost of education previously because it used to be hard to get a loan for school. People had to actually save money for it, get a scholarship, or pay as they went along. There was a natural limit based on the available money people had available and were willing and able to use to purchase education.

Less than a decade ago (2008/2009) the average in-state tuition was $6,585 for a public school. I graduated in 2006 and this number seems accurate. My undergrad tuition in 2006 was something like $5,500-$6,000. Based on data from the College Board, the inflation factor for 2008 is ~9.5 (against the reference value in 1978 of 1, when the numbers begin). Which means the average cost of tuition for in-state public schools was $693. The minimum wage in 1978 was $2.65. It would thus take 262 hours to be able to earn enough to pay that tuition. That averages out to a mere 5 hours a week! And that's the worst case scenario (making minimum wage). Using the 2008 numbers, the minimum wage was $6.55, so it would take 3.83 times longer to pay tuition (1005 hours)! And that was nearly a decade ago - it's gotten far, far worse since then. Viewed another way, if the cost of college was subject to the normal inflation that the rest of the economy average, that $693 would be a mere $2,737 for 2008.

In my state the state legislature has repeatedly and dramatically curtailed state funding for the public colleges, which of course has led to tuition increases. Then the state legislature capped the percentage in-state tuition may increase on an annual basis. Now the public schools take far fewer in-state students and instead focus on out-of-state and foreign students who are able to pay the pretty darn near private school tuition.

Education is a global commodity and the pricing is set by demand. The fact is other governments are assisting their best and brightest to attend American universities, which are considered amongst the best in the world, while our government is making it harder for our best and brightest to attend our own universities. This doesn't seem like a good strategy for America.

> the cost of education has gotten out of control primarily because whenever the government guarantees debt

You are talking about undergraduate tuition and the article is talking about graduate/PhD tuition, which are entirely separate issues here.

The government also caps that debt they issue to $32k. Lots of students find themselves out of money by the third/fourth year if they didn't get scholarships, and are left hoping that Mom & Dad are going to be willing to cosign for a private loan.

My understanding is that universities jack up the tuition knowing the students can get government subsidized loans and grants. Then they give tuition waivers to those who cant because the prices are jacked up and getting something from them is better than nothing.

But these students aren't getting loans - they're having their tuition waived. Now the government wants to tax the amount waived as income. If anything, graduate students will now be forced to get loans in order to pay their taxes - which is absurd.

Or maybe tuition will come back down to a level that actually matches what it costs to run the school, and grad student instructors will get paid a wage instead?

Which costs the institutions money in the form of paid wages to grad student instructors - which is an actual outlay of money. Lowering the tuition across the board for grad students lowers it for all grad students, not just the grad student instructors. Either way the institution, the grad student, or both, are out more money out of pocket as a result of this plan.

I was going to post a single comment of "Good!" But knew I'd just get down voted for it... so here I just did..

But I share the same sentiments

Destroy is certainly too strong of a word to use.

This tax plan would likely mean more student loan debt. That's also bad - but it isn't going to destroy graduate education.

PhD programs (which are the ones that are usually getting tuition wavers) don't usually increase lifetime earnings. Generally speaking, when you graduate, you make about as much as you would have if you had been working for 5-7 years... and you don't have 5-7 years of salary behind you.

U.S. education is absurdly expensive already. That's another topic but by the time you get to graduate school, you are already in debt...a lot of debt.

Considering graduate school is also unduly expensive to begin with, many people are not going to want to take on a big loan they won't be able to pay back.

The result will be a lack of higher skilled graduates from U.S. universities. It's already a problem for the U.S. and it will get far worse. That's not good for the U.S.

If I can't make rent doing this, I am unlikely to keep at it.

PhD programs already have insane attrition rates. Not difficult to imagine that any factor that makes it even slightly more untenable than it already is could have a big impact.

Waivers are generally provided in graduate programs where most of the students do not accrue education debt (e.g., STEM). Thus, for most graduate students affected by this, we are not talking about "more student loan debt" being the difference. We are talking about a difference between no student loan debt (the current situation for most STEM grad students) and a great deal of student loan debt (the situation if this passes). I do not think "destroy" is too strong of a word to use.

A similar analysis has been circulating mailing lists at MIT over the past few days and all the grad students are already freaked out by this.

As someone who is in the process of applying to phd programs and has already made peace with the lost earnings this really sucks. If this provision makes it into the tax code I will have to strongly reconsider my plans, as will many other students.

It might be better to start the program, and then, if the finances of all academia get nuked by Congressional Republicans, your adviser can help you find some place outside the USA to transfer or something.

So the plan is...

>> Under the new GOP tax plan, however, those tuition waivers would be taxed as regular income...

Sensationalist headlines aside... Why is this being targeted in the new tax plan? Usually I can find something with a quote from someone that explains.

Well, if you have to ask... because Education, the Elite (not the rich, those are fine), and Science are bad. They interfere with accumulation of stagnant wealth and power.. along with election prospects.

https://www.nytimes.com/2017/09/09/opinion/sunday/trump-epa-...

Also, they cause people to question biblical authority.

The reason is to balance rate decreases at the top percentile, to decrease the corporate tax rate, and to finance lost revenues from dropping the estate tax. The rest of the reasons people state are needlessly obtuse or purposefully deceptive.

There’s one mathematical reason, it’s because this bill can not increase deficit past a certain amount, and so to balance giveaways to the rich we must demand more of every other income quintile.

Bingo. I think you hit the nail on the head here. To offset the decrease in revenues expected from the upper quintiles (and the corporate tax), they need to raise revenues elsewhere. This is not a change that can be addressed by a simple accounting trick.

Getting rid of deductions of these types is also almost universally favored by economists.

Simple tax plans are economically efficient; deductions increase the overall tax rate and distort the market. This is being taken out as one of many deductions; it isn't being targeted in any real sense.

Broad-based low-rate tax codes are widely accepted to be the best kinds of tax codes.

From my brief assessment, it seems like tuition waivers are a form of barter. Other forms of bartering are taxable, so they're eliminating this exception.

As for bartering being taxable, I wonder how employee-only discounts at retail establishments work? Is the discount amount taxable (or should it be taxable)? From my understanding of research tuition waivers, the PhD student is working for the university, and as an employee is getting a steep discount on the product (education) they normally sell.

> As for bartering being taxable, I wonder how employee-only discounts at retail establishments work? Is the discount amount taxable (or should it be taxable)?

I just looked this up on the IRS Employer's Tax Guide to Fringe Benefits [1], and it looks like only discounts on products that are less than gross profit margin are income tax exempt. E.g, if you sell a Widget for $10 and make $2 profit on every sale, you can provide a $2 discount to the employee, and then deduct that $2 from the employee's wages.

Furthermore, employees that are 5% owners or that make more than $120,000 are unable to claim any employee discount deduction.

[1]: https://www.irs.gov/pub/irs-pdf/p15b.pdf (p10)

Because the vast supermajority of academics vote for Democrats, and because the Republican base has a cultural preference for basing the economy on physical labor in heavy industries. Basically, it comes down to what the Congresscritters passing this consider a "real job". Tax subsidies will be used to transfer money to "real work", and tax penalties to take it away from "fake work".

If you have a graduate degree (spoilers: I do), Congress is now labeling your education and your job as fake work.

International students earn more than 50% of graduate STEM degrees. If this made it harder for internationals to secure funding this would result in fewer overall grad students while increasing the ratio of natives. At the same time grad students will need more student loans which works nicely for the banks and/or shifts more control to government run loans. Sounds like a win/win for Trump's base.

Except it will likely have the exact opposite effect. International students often (sometimes?) do not qualify for tuition waivers, or they qualify for a reduced amount of waiver. Therefore, the bill makes it more burdensome on domestic talent and levels the playing field for international students. Expect fewer domestic graduate STEM students and more international. Is that good or bad? I have no opinion on the matter.

Why is this being targeted in the new tax plan?

It's not really being targeted. It's just part of an across the board change to get rid of or reduce tax deductions of all kinds.

Under the logic of the tax code, tuition waivers should obviously be taxable. The University is basically paying for graduate student labor with a vastly below-minimum wage stipend, along with a very valuable free education. "In kind" benefits (such as the use of an apartment) provided by an employer are generally taxable. That doesn't mean tuition waivers should be taxed. It just means you have to be intellectually honest and call them what they are: a tax break.

But viewed in that light, maybe they're not so defensible. While a small minority of graduate students may come from the lowest income backgrounds, on average they're highly educated and privileged. So in essence, it's a tax break for among the most advantaged people. Why is that "fair?"

People in graduate programs tend to come from privileged backgrounds but themselves are not privileged in terms of wealth. I fail to see how taxing somebody making 25k in pre-tax income with a 15k bill is sticking it to the wealthy. The proposed changes also do not care at all what background you come from. They hurt the kid who came from nothing to go to grad school just as much.

The question is whether you really derive ~50k/yr of value in tuition that these waivers cover as a PhD student. I think I took like five classes my entire career in grad school. Hardly seems worth the ~250k that I was "granted" by the university.

The tuition waivers are mostly government funds. This tax would force universities to pay students significantly more so that they can afford basic living expenses, thus drastically reducing the amount of science that can be done at present funding levels. If goverment caps the stipends, it would prevent many students from pursuing graduate degrees in the US. Those most affected would be those privileged graduate students -- those likely to have beaten the odds purely on merit. These factors would tend to drive top faculty and students to other countries. If science funding levels were boosted to compensate (hah), it would all be a meaningless accounting trick.

You assume that tuition is actually an "in kind" benefit. Most of that tuition money is not an in kind benefit at all. Rather, it is a way for the university to siphon off overhead from grant money. If you think of graduate students as apprentice workers, which is far closer to the truth than students, then taxing overhead costs is a ridiculous idea. We don't tax business expenses, why would we tax educational institution business expenses?

At the same time, repealing the tax break hurts those least privileged the most. Why is that making things more "fair"?

Graduate students, as a class, are not the "least privileged." Most are from families that are pretty educated and well-off to begin with.

That is true, and is unrelated to my comment. I was referring to the least privileged members as a subset of that class. I know plenty of PhD students who were the first in their family to attend college, or graduate high school.

It depends on what you do with the extra revenue after you repeal. Repealing it and using the revenue to lower corporate taxes may or may not be fair (maybe it creates more jobs for lower-income people, who knows). Repealing it to increase the earned-income tax credit would almost certainly be fair. You'd be getting rid of a tax break that disproportionately benefits more privileged people, and expanding a tax break that disproportionately benefits less advantaged people.

> Repealing it to increase the earned-income tax credit would almost certainly be fair.

False. The IRS states that the EITC only applies to those over age 25 if you do not have a qualifying child (many graduate students fail both). Also, some graduate students fail the most basic tests for EITC-eligibility since they do not have "earned income" despite having taxable income.

Another thing is that the tuition being added to AGI means every single graduate student will be ineligible for the EITC just on AGI grounds.

Anyway the plan uses it to fund corporate tax cuts so your hypotheticals don't really apply -- we have a concrete bill to discuss.

See: https://www.irs.gov/credits-deductions/individuals/earned-in...

https://www.irs.gov/credits-deductions/individuals/earned-in...

The fact that graduate students may not be eligible for the EITC is irrelevant. The point is that the people who are eligible for the EITC are statistically much more likely to be underprivileged than graduate students are (as a group).

As to the plan to use the tax break to fund corporate tax cuts, it depends on economic conclusions that are beyond my understanding. I tend to be of the mind that we shouldn't tax corporations at all, and focus on taxing individuals.

Since you acknowledge the increases in the EITC are unhelpful to these underprivileged students you are then saying it is acceptable to raise taxes on the underprivileged portion of a largely privileged group because it's statistically hard to tease out the difference. That's...heartless?

Balancing it out in other members of the lower income class doesn't really help, IMO. You are penalizing people who are underprivileged for trying to improve their lot in life and move into a higher class with one of the best means possible: higher educational attainment.

It's obscene.

P.S. your point about taxation of corporations is interesting too: corporates shouldn't be considered people for purposes of taxation but can participate in political activity and speech (political donations) using rights of individuals. Nice deal, if you can get it.

> Since you acknowledge the increases in the EITC are unhelpful to these underprivileged students you are then saying it is acceptable to raise taxes on the underprivileged portion of a largely privileged group because it's statistically hard to tease out the difference. That's...heartless?

No, it's utilitarianism. A tax break that disproportionately benefits the educated and well-off shouldn't be preserved just because a small minority of the people it benefits are not well off. Better to eliminate it in favor of a tax break that primarily goes to disadvantaged people.

> You are penalizing people who are underprivileged for trying to improve their lot in life and move into a higher class with one of the best means possible: higher educational attainment.

Someone who has gotten into graduate school necessarily has an undergraduate degree, and probably can make a decent living. At that point, it's better to focus government money on people who aren't so lucky.

> corporates shouldn't be considered people for purposes of taxation but can participate in political activity and speech (political donations) using rights of individuals.

The "people" thing is a red herring. "People" shouldn't lose their free speech rights just because they act in concert through a corporation. That has no bearing on whether "people" are more appropriately taxed at the corporate level or the individual one. The latter is a purely utilitarian concern. I don't think there is anything morally wrong with taxing corporations, I just think it's not worth the hassle given how easy it is for corporations to move to low-tax countries.

Okay, I think I understand your position now and I agree it's self-consistent, even though I disagree.

Still, good luck to the US remaining a scientific leader with this change.

Is your logic here that major research universities would maintain the same fee structure and allow less qualified wealthy students to assume the spots lost by students who can't afford the tax change?

Universities compete for research talent. Won't they simply adjust their fee and stipend structures to accommodate this change?

I assume stasis in the rest of the ecosystem, yes. It's hard to predict exactly what the repercussions would be. Yes, it's unrealistic. What else can we do? Also, the GOP wouldn't have repealed this exemption in the bill if it didn't mean increased tax revenue, so the money has to come from somewhere. In the end it's a reduction in funding for higher education.

Universities compete with each other for research talent, but they also compete with private industry for graduating BS/BA students. If the amount of money flowing to higher education in general is reduced, it may be harder for graduate schools to compete for the best students against private industry, even though they continue to compete as best they can with each other.

Here here. As a first in the family to attend college Ph.D. graduate, this tax bill seems terrible to me. Luckily, I finished my Ph.D. two decades ago. Thus, America continues its long decline by older generations pulling the ladder up against the youngers.

I want to provide a different view on tax policy here, which is that it is not logical and consistent, nor should it be.

I know the idea it should be is a popular perception among tax lawyers and economists, but our system of government does not put tax lawyers and economists in charge, and that's on purpose.

The reality is that tax policy exists to create specific outcomes in society--either by funding public expenditures, or by creating incentives to shape private expenditures. Politics is how we set and prioritize social outcomes. Tax policy comes out of a political process.

So as you evaluate a change in tax policy, you need to start with what you like and want in society. There's a lot to recommend graduate education, and in particular STEM graduate education (which tends to get the most tuition reimbursement). You don't detect gravity waves, find a vaccine for cervical cancer, or increase solar panel efficiencies without a lot of highly educated people. You don't attract the world's greatest minds without a prestigious, well-funded, and diverse higher education system.

Outcome-oriented thinking helps avoid unnecessary blinders about the scope of the tax system. We don't have to choose between STEM grad students and the EITC. There's a whole huge world of other tax policies out there we can think about.

Exactly. If you raise taxes on graduate students, regardless of how precisely the money gets shuffled around, the net result is going to be less money available for research and the necessary labor, and therefore lower research productivity. This tax increase is really a back-door way of cutting federal investment in research (and training researchers).

> While a small minority of graduate students may come from the lowest income backgrounds, on average they're highly educated and privileged.

It's somewhat difficult to find high-quality statistics on graduate students in the United States, but I tried to look up some information for context. The following is not an random collection:

It appears that more than a third of doctoral students in the United States are not US citizens (compared to 7% of the overall population). Perhaps a slight majority (~52--53%) of doctoral students are female. Graduate students are also slightly more likely to be non-white than the general population. The majority are under 32 (of course).

It's probably a bit late to worry about graduate education being destroyed. 30 or 35 years ago might have been more helpful.

Sensationalism at its finest. At some point we have to demand some sort of integrity from our media. This is getting out of hand. The tax plan will force schools to alter graduate tuition accounting. But "Destroy" really?

As a former Ph.D. student and now graduate, I would have to say the title is is not sensationalist at all. This aspect of the tax plan will raise additional funds (to at least partially offset the magnitude of the revenue reductions). Where do you think those funds are going to come from? They come from the graduate students who will now be taxed on these tuition waiver amounts.

It is extremely facile to just waive arms and assert that, somehow, the schools will simply get around the issue by changing their accounting. If that were the case, why would this even be in the tax bill?

Why is this in the tax bill? Congress has complex rules around passing permanent tax cuts that raise the deficit. The GOP is attempting to present a tax plan that has very large tax cuts and an equal amount of new revenue (e.g., less deductions, less exemptions). The complex rules around deficit-neutral bills don't make provisions for future changes in behavior negating a passed bill. So Congress would like to take away this exemption to help pass their current bill; universities will change their behavior to keep the profitable graduate system in place.

> I would have to say the title is not sensationalist at all

It's appalling that you don't find the title extreme. No way will a tax plan completely destroy higher education as we know it.

> Where do you think those funds are going to come from?

Its simple. The schools are going to start including the cost of taxes when covering the grad students tuition costs. For example, if tuition is 50k + a tax of 10k. The schools will cover the 60k for tuition for a full ride. No school with a conscious is going to slap a grad student with a sizable tax bill.

Appalling? Now who is being sensationalist? What you are saying is that the school is going to bear the cost rather than the student. Probably. But then, the Ph.D. program just becomes much more expensive for the school to administer. As such, all but the most well-endowed are going to simply stop admitting Ph.D. students. Your simplified, and actually unworkable, accounting trick achieves the same effect of destroying our world-class and unparalleled STEM graduate system.

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