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U.S. Senate bill would preserve tax-free tuition waivers for graduate students

But universities oppose endowment tax and other provisions in reform plan

by Glenn Hess, special to C&EN
November 14, 2017 | APPEARED IN VOLUME 95, ISSUE 46

The U.S. tax reform package proposed by Senate Republicans would retain many of the tax benefits for undergraduate and graduate students that the GOP-led House of Representatives put on the chopping block.

But the Senate measure also includes several key provisions strongly opposed by higher education groups, such as an excise tax on some private colleges with large endowments and the elimination of certain state and local tax deductions.

The Senate bill “still places too much of the burden of fixing our outdated tax system on America’s nonprofit universities,” says Mary Sue Coleman, president of the Association of American Universities, which represents 62 institutions.

Universities are disappointed that both versions of tax reform legislation would impose a 1.4% tax on investment income at private schools with endowments worth at least $250,000 per full-time student. The tax would affect up to 70 schools and raise an estimated $2.5 billion over a decade.

“Congress seems eager to redirect these funds to the federal government’s coffers, with no clear benefit to America’s hardworking students and their families,” Coleman says.

The Senate’s plan would also eliminate the deduction for state and local taxes, which universities argue would put pressure on high-tax states to cut taxes and ultimately discourage state investment in public colleges and universities.

However, the Senate would retain several tax breaks for students that the House plans to abolish, such as an exemption that allows graduate students to avoid paying taxes on the tuition waivers they receive when they work as research or teaching assistants.

The House’s proposal to eliminate the tuition exemption “would potentially double or triple the taxable income of graduate students, making graduate education unaffordable,” says the American Chemical Society. “If the proposed repeals are enacted, it is anticipated that a significant number of science, technology, engineering and mathematics students will forego their graduate education, thereby undermining the U.S. innovation pipeline that is so critical to job creation and economic growth.” ACS publishes C&EN.

In another departure from the House’s legislation, the Senate would keep the tax credit for payment of student-loan interest.

On the business side, both plans would slash the corporate tax rate from 35% to 20%. But the Senate bill would delay the rate cut to 2019, while the House would make it effective in 2018.

The one-year delay would lower the cost of the bill by more than $100 billion. Senate Republicans are trying to limit the revenue impact to comply with procedural rules that would allow the bill to pass on a party-line vote.

Republicans aim to overhaul the U.S. code by the end of the year. If the House and Senate pass separate bills, lawmakers will have to reconcile the differences.



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Brendan MccCullian (November 17, 2017 2:09 AM)
My name is Brendan McCullian and I’m a graduate student in physics at Ohio State University. I’m part of an organizing group reaching out to graduate students nationwide who share an interest in protecting current and future graduate students from the GOP tax bill. The version of the bill passed by the House of Representatives would triple the tax burden of many TAs and RAs, pushing some of us out of higher ed entirely. As part of a coordinated nationwide effort we seek to have graduate students demonstrate our political power in as public forum as possible. We strive to get our universities and our congresspeople to take a hardline stance to protect graduate students. We aim to kill this heinous provision and the bill to which it belongs before grad ed is devastated.

We’re calling on student organizers to join in our national effort to organize in protest of this bill. Follow the links provided to our Facebook and Twitter for more information. Together we can Save Grad Ed!
John Donaldson (November 21, 2017 9:42 AM)
Brendan, Contact your senators and explain how important your research is to future economic growth
Ellen Weiss, Ph.D (November 22, 2017 12:30 PM)
I could never have had the satisfying and productive career that I enjoyed without the level of graduate student support I had at two amazing public universities. I could live on very little because the work was so fascinating. But I could not have done lived on what I earned in tuition waivers and teaching stipends and also pay the taxes that Congress is proposing.

Ellen Weiss, PhD
Professor Emerita
Tulane University

Mary Sorensen (November 29, 2017 5:03 PM)
This would not only affect GRAD but UNDG as well. I am a divorced mother of three who is working for a private University. My children use the tuition remission to attend college. My ex-husband is a dead beat dad who has not paid his child support. If not for my job at the University and the tuition remission my children would not get an education and be more of a burden on society than if they got one. Universities do no pay much to staff, but the benefits like tuition remission make up for the low pay. I can not believe that anyone would vote to have this benefit taxed - on the GRAD and UNDG level. If the idea is to make America Great - you can not get there without education.
Peter Sun (November 30, 2017 12:41 PM)
I totally agree with Mary. Some would argue that when the professors and Staff of some private universities do not need to pay tuition for their children, it is the general public who are picking up the bill. I do not agree with the argument. In reality, because of the tuition assistance program for dependents, with minimal increase in cost and expenses, the universities could retain high quality faculties and staffs at a salary level that is 20% or more lower than the average in private companies. Thus, the dependents' tuition assistance program helped lower the overall cost of college education for EVERYONE in this country!
Peter Sun (November 30, 2017 2:33 PM)
Furthermore, it is totally unfair to those who have worked at University for a long time: their initial decision to work at University was largely determined by the overall package, the dependents' tuition assistance included. Now that after being under-paid for many years, they suddenly find that a very important of their 'assumed' income will be stripped away from them. --- It is just not fair to them.

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