Congress should step away from a plan to tax the tuition waivers graduate students receive when they work as researchers or teaching assistants. It could deter students from pursuing degrees the economy needs.
Living on a $32,000-a-year stipend in the Seattle area is no easy feat. For about 7,000 graduate and Ph.D. students at the University of Washington, it might get even harder.
The U.S. House version of the tax-reform plan would roughly double those students’ tax bills by taxing the tuition waivers the university gives them in exchange for their work as teaching assistants or researchers. Essentially, the plan would treat the students’ free tuition as taxable income even though they never see a cent of the money.
This could have a detrimental effect on a student’s ability to pursue higher education, or consider a career change that might involve graduate school.
While the typical UW graduate student now pays $2,743 a year in federal taxes, the House Republican plan would increase the average student’s bill to $4,236 a year for in-state students and $5,774 for nonresident students, according to the university. Students at other institutions, including 1,900 at Washington State University, would also feel the effects.
Mark Bounthavong, a fifth-year Ph.D. student in the UW’s Comparative Health Outcomes, Policy and Economics Institute, estimated he would have paid an extra $2,500 a year in taxes if the House GOP tax plan were in effect during the first four years of his studies, when he was a teaching and research assistant. That would have been enough to have prevented him from going back to school and pursuing a second career as a health-services researcher, he said.
At the time, he brought home about $2,000 a month from his university stipend, with half of that going toward rent, he said.
“You don’t have a lot of money left over for the additional tax burden,” said Bounthavong. “It would be very difficult to survive.”
In effect, the House plan could deliver a sizable blow to universities’ teaching and research networks, which rely on tuition waivers to recruit quality graduate students. It also could deter people from pursuing advanced degrees in science, technology, engineering and mathematics, which are in high demand in today’s economy. Nationwide, about 145,000 graduate students receive a tuition reduction each year.
“They are the next generation of desperately needed doctors, nurses, computer scientists, engineers and farmers in our state that will continue to build and innovate in our economy,” wrote UW President Ana Mari Cauce and WSU President Kirk Schulz in a letter to members of the state’s congressional delegation.
Congress should remove this provision from the tax plan as they negotiate the final version of the legislation.
Cutting the corporate tax rate is expected to cost the government about $1.5 trillion over 10 years. Taxing graduate students’ tuition waivers would offset those costs by $5.4 billion.
If the goal of the tax package is to make the United States more economically competitive, penalizing students and higher education is not the way to do it.