Thanks to the Republican tax bill being considered in the House of Representatives, my own tax bill could go up by nearly $10,000 next year — and that’s not the half of it.
I’m a graduate student in the history department at Princeton University. I have a generous stipend from the school — about $32,000 — while teaching and working on my dissertation. I pay taxes on the income I earn as a graduate student — about $2,600 in the past. But if the GOP’s plan is passed, I, and nearly 150,000 other graduate students in the United States, could pay more than $11,000 in taxes. Here’s how.
Currently, Section 117 of the U.S. tax code exempts “qualified tuition reduction” from colleges and universities from being counted toward calculations of gross income for tax purposes. Many, though not all, PhD students in the United States have tuition waived by their universities in exchange for teaching or research activities.
The GOP’s proposed bill would eliminate Section 117 and subject tuition support to taxation. This would imperil graduate education in the United States.
What this means, in effect, is that graduate students would see their tuition support added on top of their stipends when their gross income is calculated by the Internal Revenue Service. For myself, this would mean adding the university tuition — about $49,500 — on top of my stipend. In effect, I would be taxed for about $81,000 in gross income, when my actual pay is less than half that.
That would mean — even with the proposed increase to the standard deduction and the new tax bracket structure — that my tax bill quadruples to $11,400. This is by no means an unreasonable federal tax bill for someone making $81,000 a year — in fact, it’s a nominal tax rate of only 14 percent. But, because my real income is roughly $32,000, my effective federal tax rate under the new plan would be about 35 percent.
The math is no less grim for students with families and children. Say you’re a married graduate student at Princeton. Your spouse has a full-time job and makes $50,000 a year; you have two school-age children. You’re filing a joint tax return. For sake of simplicity, you have no other deductions beyond the standard.
According to H&R Block’s tax calculator, you would owe about $5,000 under the current law. Under the proposed Republican plan, you would owe about $15,000.
This same basic math affects graduate students across the country. Vetri Velan, a physicist at the University of California at Berkeley, has estimated that PhD students earning tuition support at the in-state rate at that institution could see their taxes increase by 31 percent under the Republican plan. PhD students at MIT could see their rates increase by up to 240 percent. Others have pointed out that students in the STEM (Science, Technology, Engineering and Math) fields will be particularly hard-hit by the GOP’s tax plan.
The very purpose of stipends and tuition support is to provide opportunities for working- and middle-class students to pursue advanced degrees. One hundred years ago, before the advent of the modern stipend/support system, academic careers were closed to all but the independently wealthy. Taxing tuition support would essentially force graduate students without independent means — or parents or partners to support them — to leave their programs. And many who now dream of pursuing graduate study would simply not apply.
Nobody goes to graduate school because it pays well. Even graduate students in STEM fields face a discouraging, often grueling job market post-PhD. We go to graduate school to study physics, biology, chemistry, philosophy, history, mathematics, economics, languages and dozens of other subjects because we believe they are foundational to building a better nation and a better world.
Much is still uncertain about the effects of the GOP tax plan. Different universities have different ways of classifying tuition support — some categorize it as part of scholarships and fellowships, which would not necessarily be taxed under the proposed bill. Different programs have different funding structures. Students shift across funding structures through their graduate careers.
One year, a student might be paid through a fellowship; the next year, that same student might have their funding from a teaching or research assistantship; the next year, that student might be paid from a combination of a fellowship and an assistantship. But it is clear that most graduate students in PhD programs in the United States would see their tuition support taxed as income for at least part of their graduate careers.
America’s universities have historically been one of this country’s greatest assets, from the days of the Land-Grant College Act in the 1860s to the critical role higher education has played in the development of the Internet in the 20th century. Graduate students play a critical role in the teaching and research missions of American universities and in the U.S. economy more broadly. The GOP tax plan as currently written would cripple that role.