On Friday, the Republican-controlled Senate joined the Republican-controlled House in passing a major tax reform bill. The Senate’s plan will now have to be reconciled with that of the House before a final bill can land on President Trump’s desk. In finding a compromise, the joint committee should opt for the Senate version of the bill on at least one crucial point.
That is one reform in the House tax reform plan that largely has been overlooked by conservative media and could have devastating effects on American education, innovation and the economy: if the current bill in the House is passed, graduate school tuition waivers will be counted as personal income and be taxed. The result would be a massive tax increase on grad students, most of whom barely have money for personal expenses, much less paying taxes.
According to Snopes, as of a little over a week ago and in contrast with that of the House, the Senate version of the bill continued to exempt tuition waivers from being counted a personal income. The version passed Friday makes no changes that exemption either, according to The Washington Post. It should stay that way in the final bill.
As a conservative, I love the concept of tax reform that closes loopholes, reduces the number of tax brackets and lowers rates. Additionally, our current corporate tax rate is suicidally high, but this bill would lower it from 35 percent to 20 percent. I’m in full agreement with the broad objectives of the plan, though not with some specifics. The end of the exemption of tuition waivers found in the House bill is a deal-breaker.
And of the many discrepancies between the Senate and House versions of the plan which must be reconciled, this is the most make-or-break for me. I am not a graduate student, though I was not long ago. I may be again in future, though it would be less likely if the House got its way on this issue, which would only discourage conservatives like me from adding conservative influence to colleges and universities. More pertinent today is the fact that many friends and peers of mine could be directly affected by this. Ultimately, it has been reported that the change could affect hundreds of thousands of students.
A typical student’s income might rise from around $20,000 per year to around $50,000. Not only does that more than double his taxable income, but it takes him to a whole new tax bracket, in which the rate is two-thirds higher than it was. It is an increase in income tax from a couple thousand dollars out of an already meager annual income to nearly half of that income.
Yet conservative outlets have not made much noise about the damaging effects of this exponential tax increase, despite their general support for lowering tax rates. Forbes is the closest outlet to conservatism ideologically in which I have found a critical story. There Ethan Siegel writes that
The ploy appears to be to destroy higher education, to shift the tax burden onto the most educated rather than the most financially successful, and to disincentivize graduate school as a viable option for the majority of people who'd choose to pursue it otherwise.
This attribution of nefarious objectives on the part of the GOP sounds hyperbolic, of course. And some will object that a tuition waiver is a kind of compensation for employment. However, as Preston Cooper at Forbes pointed out, there are plenty of forms that employment compensation takes, such as employer-provided health insurance coverage, which the House bill does not reclassify. Nor should it.
Despite Cooper’s criticisms, he does not believe, as Siegal does, that counting tuition waivers as income will destroy graduate education. Universities could just reclassify tuition waivers as scholarships, which would remove them from the path of the taxes. Still, they “cannot stipulate that students work as teaching or research assistants as a condition of receiving [the scholarships].” This would add or shift the cost of employing teaching and research assistants, which the universities would have to cover through, among other means, tuition. And why remove the opportunity for students gain experience and add to their resume, all for chump change in the grand scheme of federal tax revenue?.
If conservatives are hoping to hit institutions of higher education for being centers of liberal indoctrination, this is a strange way to do it. Ultimately, schools will, like any corporation, pass its costs along to its customers: the students. These are students that, if they are going to slide left politically while in college, will have done so by the time they become graduate students. Furthermore, massive taxes will only price middle- and lower- income students out of a graduate degree. Rich coastal elites would still send their kids to grad school and further cement their influence over academia and industries dominated by those with Master’s degrees and PhDs.
Fewer graduate students mean less of the innovation that makes America run. It means a greater need to bring in high-skill immigrants while talented people who are already here are priced out of graduate degrees. It doesn’t even make sense from a deficit and debt perspective, since government revenue is higher if people have more education and earn more.
Worst of all, it destroys opportunities and dreams for many low- and middle-income Americans, the opposite of what conservatives hope to achieve with tax cuts and reform. This so-called reform needs to be stuck from the final bill. Conservatives should insist upon it.