Against a Tax Increase on Berkeley Students
lucatrevisan.wordpress.com
lucatrevisan.wordpress.com
Basically tuition is usually not charged for Phd students but is used for accounting purposes to get money from Federal agencies.
The "tax increase" would stop incentivizing universities to do these accounting tricks and declare tuiton as 0.
This is a good step in that tax code is simplified and accounting tricks / loopholes are closed for corporations and universities (and other public/private entities).
This is what I read, can anyone clarify this?
" But from an outside perspective, the current rules look like a money laundering scheme. Universities use an accounting gimmick of setting an arbitrary dollar amount for PhD student tuition, and then waive it. At least in STEM fields, essentially no PhD student actually pays tuition. Why not just set tuition to 0? The reason is because “tuition” can be charged to funding agencies, and so this accounting trick of setting and then waiving tuition allows universities to extract more overhead from the NSF, NIH, etc.
Of course, this accounting trick represents a non-trivial fraction of government support for academic research. It seems natural to simplify the tax code by disallowing this trick, but unless the goal is to de-fund academia (maybe it is), it should be countered with an increase in direct funding to universities from funding bodies. "
Grad students are essentially employees of the university, if they're being reimbursed tuition costs why should they have to pay taxes on a reimbursed expense when other employees don't?
The university has decided to declare a tuition of $50k per year. So charging one student $50k and then providing the rest of the students with a reimbursement, is seen as a gift similar to your employer gifting you a car. The university could choose to set tuition at $5k per year instead and with a little bit more grad student pay and the tuition tax deductions, it should all be even.
In this case, it's not that the grad student is getting to take classes (this is tuition we're talking about, remember) for the university, nor is it that the school is benefiting from the student taking classes. That's something the school is providing to them as a service for a cost.
What the schools and grad students are trying to do is to barter their way around taxes: "you give me tuition, I give you some TA and research work", and no (or minimal) money changes hands. That the tax code allowed this was a loophole: in general, you're responsible for the value that was received, not just the dollars portion.
This is even part of ObamaCare: I have to pay tax on part of what my employer pays for my healthcare, even though it was never given to me in any monetary fashion. (the reason it's only "part of" is one of the great tax engineering f-ups, leading to the disaster that is our current system of health insurance)
Even campaign finance law recognizes in-kind services as being equivalent to the dollars they'd otherwise be worth. If your airline writes off the cost of the candidate's cross-country trips, for example, the value of those tickets would count as a campaign contribution.
Why not? The grad student's real job is research. The tuition is for classes to make them better researchers.
I will rephrase the scenario slightly: The university collects tuition on PhD students to recoup costs in education. This can be for paying professors (who teach the courses and advise the students) to paying electricity the student uses when doing their research. Getting a PhD is a questionable decision in terms of finance for the student. Advisors are able to write into grants support to pay tuition for students. This makes it easier to entice talented students to work with said advisor and get a PhD, rather than joining the workforce straight out of undergrad.
Here at Georgia Tech, which is a state university, TAs and RAs get an in-state tuition waiver instead of a full tuition waiver. In other words, you get to pay less tuition than if you came in as an out-of-state student.
But you still don't pay in-state tuition: the professor who funds your RA (or department in case of a TA) pays your in-state tuition on top of your stipend.
So there really are no "accounting tricks" going on since the tuition is covered by either faculty funds (e.g., external grants) or the relevant department's budget.
That sounds like income.
For me personally, taxing the tuition benefit would be the "straw that broke the camel's back". I believe that the only thing keeping the PhD system running (for domestic students at least) is the fact that it's fully funded and not taxed. If you take that away, many students like myself will just not continue.
In a nutshell, if you want to ruin the US academic research system, tax our tuition waiver. Europe will suddenly become much more attractive, even for US citizens...
> The "tax increase" would stop incentivizing universities to do these accounting tricks and declare tuiton as 0.
You cannot just ask the Universities to "declare" tuition as 0. It is not some money laundering scheme for the purpose of cooking tax books. The universities actually do get all that tuition $ from the funding bodies. The tuition is "waived" for PhD students, because it's paid for by the PI's research grant/funding agencies. This bill does not shift some already-existing tax burden from universities to students---it's creating new tax liabilities for the students.
You cannot just write laws to force Universities to zero out graduate tuition and forfeit all the revenue either, as the Universities would just hike up administrative overhead, cutting a bigger slice from the PI's research grants.
What really should have been done, for curbing student debt and stopping nonsensical measures like this one, is to restrict university administrative expansion, board member salary, campus expansion etc. Universities have expanded too much from their core functions of teaching and research, by adding out-reach programs and program administrative staff.
What's wrong with this solution? It looks like it leaves the grantors, universities, PIs, and graduate students in the same financial positions, but use a more straightforward and logical way to get there.
Because the grantors, universities, PIs, and graduate students are not in the same decision-making positions. PIs and graduate students are absolutely powerless. Grantors may impose rules to give preference to projects from low-overhead institutions, but that's difficult to implement, as the grantors would mostly prefer high impact projects rather than seeking out which school is cheaper. The result would be just higher administrative overhead, and less $ for actual research.
I do realize that many commentators on HN believe that university research is a scam, does not create value, or that graduate students who choose to do a PhD are naively making irresponsible financial decisions, or that grant funding should be reduced in order to weed out the less-capable PIs and RAs/TAs. If I were to take on a perspective from this philosophy, then I would agree that zeroing out graduate tuition is good, as it disincentivizes people from considering a career in academia and imposes a self-limiting mechanism to the academic Ponzi scheme. Personally, I do not believe that defunding academic research is good for society---but restricting university administrative cost would do tremendous good to solve the educational cost problem.
I'm not taking that position at all. Here's how I understand the current situation. A grant proposal would say something like:
$1,000,000 Lab Equipment and reagents
$250,000 Post-Docs
$150,000 PI
$300,000 Phd students tuition waivers
----------
$1,700,000
x 1.2 university imposed overhead
----------
$2,040,000
If this law were to pass the grant would instead be written up as:
$1,000,000 Lab Equipment and reagents
$250,000 Post-Docs
$150,000 PI
----------
$1,400,000
x 1.457 university imposed overhead
----------
$2,040,000
The grantors could decide not to agree to this second grant, while they would to the first, but they have no good reason to do that. From their perspective it's the same thing.
Also, costs for graduate students do not linearly map to costs for Post-Docs and PIs. This would de-couple the funding for graduate students from the actual enrollment, and would make the computation of the appropriate overhead rate even more complicated and fraught than it already is.
The other important thing to note is that the grantors don't pay the overhead until the actual underlying cost is incurred. Trying to project what it would be would be very hard.
In public institutions, there is a linear relationship between the reduction in state funding for education, and increasing student debt. Per-student spending is down at UC: http://dailybruin.com/2014/11/18/tuition-rises-despite-decli...
Research spend has gone up a lot, but so has federal funding, and the bureaucratic requirements imposed by the feds to obtain that funding. See OMB Circular A-21 if you want your eyes to bleed with this stuff.
As someone who apparently "essentially" doesn't exist, I object to this statement.
Further, there exist fields other than STEM, and I'm not even sure this applies to all of STEM.
so many of the people I speak with who either go to or went to Berkeley support raising taxes.
They think if the government is better funded, it can provide more social good.
But now that it's actually happening to them, there's this massive pushback.
I don't know if this tax bill will be beneficial or not, I'm a coder, not an economist, but I do think there's just a bit of irony happening with this proposed tax increase.
When you're in the Bay Area and your students can choose to work for the University or go get a paid internship down the road, you have to compete on wages.
I would be in favor of collecting enough money to start paying down the national debt. But, only if that money is collected evenly across the tax base not simply shifted to tiny sub groups.
You can argue that the government is bad at spending that money, but this is a completely separate complaint.
Also the argument that the government is bad at spending money is exactly the point. I would possibly be supportive of higher taxes if I thought the money would be used to pay for useful things.
And the complaint is that this particular plan will let the rich pay less, not that the rich should pay more.
https://www.marketwatch.com/story/45-of-americans-pay-no-fed...
Even with a moderately regressive income tax the rich will be paying more total tax even though they are paying a smaller percentage of their income as tax. Therefore you can not make any conclusions about the fairness of a tax by saying that the top 20% of earners pay 80% of the total amount of income tax (it would have been absolutely crazy if this was not the case, unless everybody had the same income).
As such, I do not see how this article can be used to say anything about whether the tax is progressive or regressive (and as you mentioned, whether it is fair altogether).
Edit: I suppose if you figure in sales taxes into overall tax burden you could call some states regressive. But that is not a feature of their income tax rates.
in 2014 the top 1% of income earners earned 20.6% of all income and paid 39.5% of income taxes collected.
the bottom 50% earned 11.2% of income and paid 3.45% of income taxes.
https://files.taxfoundation.org/20170201091804/TaxFoundation...
[1] https://www.washingtonpost.com/news/wonk/wp/2012/09/19/heres...
If you believe that the regressive nature of state taxes balances the progressive nature of Federal, do you believe that state income tax collects as much as Federal, or are you simply counting them equally because they are both types of taxes? If the latter, why would you say that the rich don't pay more, percentage wise? If the former, why do you believe this?
[1] https://itep.org/whopays/#The%2010%20Most%20Regressive%20Sta...
To make it fair, we take the means of production: ownership over companies, facilities, land.
So basically you got that already.
The sensible way to eliminate the special tax treatment would be to first change how the university does the accounting, so that a bunch of stuff that the university does for university purposes doesn't get imputed to the student as income.
It's hardly the same thing as taking away, say, the mortgage interest deduction.
Even campaign finance laws reflect this. Suppose you're an airline and you write off the costs of a candidate's tickets when he flies around the country campaigning. The value of those tickets must be recognized as a campaign contribution.
Ah, but you don't write off the costs of airplane tickets for the cabin staff, which is what would really fix the analogy here. Grad-students are serving as employees and trainees of their advisors. In industry, you would never, ever ask a trainee to pay twice their wages in "training costs" to their employer. They'd leave, and never look back.
I agree with people in the other thread that we really should find a way to end the legal fiction that PhD students with "tuition waivers" are being charged or paying any tuition at all. They're something between interns and entry-level employees, except of course that charging interns for the internship remains illegal.
In the early 2010s, we all made ~$28K/yr, while the university pocketed a comparable sum from the funding agencies as "tuition." I assume that they spent it like any other general tuition funds. For the vast majority of the time during a typical graduate career, everyone was working on individual research. I suppose the "tuition" could be interpreted as paying for the 1 hr a week of meeting with your advisor (when they weren't blowing you off for conference travel), but that seems like a stretch. That money should stay in the sciences, and ideally be used to pay grad students more.
So it would be good for universities to get rid of this money laundering scheme, but I worry very much for the folks that I know who are still in the system who may be hurt by this. I think this problem should be treated in some way less likely to hurt vulnerable people.
The complaint is that (1) there is an effective tax hike (2) that is used to cover tax cuts for already well-off demographic.
Plenty of people would be fine with point 1 as long as the money is used to help to country / lower the deficit / pay national debt / invest in infrastructure. But people are unhappy with point 2 - the money is used to fund tax-cuts for the super rich.
But I do agree that this is the stupidest, pettiest loophole to close, especially because it's funding cuts of people who absolutely do not need them.
But some people would argue that health benefits should be taxed. We debated taxing employee benefits in Canada briefly. When an executive gets a $500k salary and $500k in benefits, should they be taxed as earning 1mil?
Likewise, the health insurance money is making me whole after an analogous loss to my health.
That's basically the definition of "not income". If you "pay me" $5 and then "charge me" $5 for the privilege of being in the same room with you, you just moved money from your left hand to your right hand. It was your money the whole time, so I shouldn't owe any taxes on it.
Specifically, the problem here is that, roughly, you would actually pay me $20, then move $40 from your left hand to your right, and then the government would charge me tax on $60. You're actually tripling my income-tax burden while increasing my real pay not a penny.
Don't tax me!
Tax that person behind the tree!
Most liberals will be happy with a reasonable tax hike that is used to help the country. This one is used to cut taxes for the rich - this is why people are unhappy.