Graduate Students Face Heavy Financial Burden Through House Republican Tax Plan

By Nikhil Dhingra

On Thursday, the House of Representatives voted along party lines to pass the Republican’s controversial tax reform bill, which is a central component of their plan to revitalize the United States economy. Through the bill, Republicans plan to substantially lower corporate taxes on companies to incentivize competition and discourage international movement. The bill plans to cut the corporate tax rate from 35 percent to 20 percent and the pass-through business rate down to 25 percent. If this bill were to be signed into law, it would serve as the largest one-time cut to the big business tax rate in this country’s history. With all of these cuts, the Trump administration hopes to cut taxes by approximately $1.5 trillion in the next decade. The passage of the bill could serve as a key accomplishment for the Trump administration, which has yet to pass any major legislative bill since Trump came into office back in January. It also serves to bolster the Republican ideology that cutting tax rates on big businesses will allow them to thrive, bringing economic prosperity to all Americans.

However, one major party the Trump administration forgot to include in this demographic were the millions of graduate students studying throughout the country. According to a graduate student studying at MIT, this plan would increase tax rates for graduate students by 300-400 percent. This unprecedented tax increase would disproportionately affect low-income graduate students, many of whom currently afford school through tuition waiver or financial aid programs. Currently, since none of the money earned from tuition waivers is spendable, this waiver is not considered taxable income. Unfortunately, a provision in the House tax bill seeks to change this.

Through Section 117(d)(5) in the Republican tax reform bill, these waivers would be taxable. With this in mind, hundreds of thousands of students would be paying taxes on income ranging from $50,000 to $80,000 a year when this is nowhere close to the actual amount of money which these students take in while at school. In order to adjust for this financial burden, universities would be forced to accept fewer low-income graduate students in order to adequately cover tuition for those they do accept. This maneuver through the tax reform bill would not only further discourage low-income students from entering academia but also disincentivize American competitiveness. If all of the cutting-edge research is being performed by students from the same economic background and social upbringing, diversity of thought in the graduate level would be severely constrained.

This plan also extends into other dimensions of academic life. For those with student loans, the bill would repeal the student loan interest deduction which allows low-income student loan borrowers to lower their taxable income by up to $2,500. Faculty and staff at numerous universities would also be affected by the Section 117(d)(5) rule, since many universities offer their faculty tuition benefits in exchange for their work. Lastly, a 1.4 percent excise tax would be added to the endowment of private universities, thereby increasing their overall tax payments.

While this tax reform bill has the potential to drastically increase education costs for millions of students across the country, the Senate still has the opportunity to move forward with a less radical reform through the current Senate tax plan. In addition, considering that Republicans have a slimmer majority in the Senate, the possibility still exists that Republicans will not be able to secure enough votes for the bill to pass. A strong push against the bill from Senate Democrats is necessary in order to ensure that millions of graduate students and college faculty are not left with unfounded burdens on income that has no basis for being considered as taxable.