Author Topic: Graduate Student Taxes under House GOP Plan  (Read 1317 times)

Kell7279

  • 5 O'Clock Shadow
  • *
  • Posts: 19
Graduate Student Taxes under House GOP Plan
« on: December 05, 2017, 07:29:37 PM »
In an effort to illustrate for friends and family just how devastating the House GOP Tax bill would be for graduate students, I created this spreadsheet. The stipend and tuition waiver numbers are mine from 2015, and the calculations are done based on current rules for 2017 and those proposed under the House bill for a single person. I'm reasonably confident all the calculations are correct.

Also, someone asked me why state taxes increase, and that's because anything considered in the calculation of federal gross income is considered as Massachusetts gross income, unless an exception is written into the Massachusetts General Laws. Unless Massachusetts changes something, anything considered taxable under IRC section 117 is considered taxable in Massachusetts.

Anyway, this took me about 45 minutes to put together, so I thought I would pass it along in case anyone else finds it useful!

nereo

  • Walrus Stache
  • *******
  • Posts: 6849
  • Location: la belle province
    • Here's how you can support science today:
Re: Graduate Student Taxes under House GOP Plan
« Reply #1 on: December 06, 2017, 09:07:22 AM »
Thanks for putting that together, it was very informative.

As a graduate student myself, I recently had this discussion with some very conservative-leaning members of my extended family.
One of the things I think those outside the academic community miss is that the money for tuition is never seen by the student or the university, and can not be avoided. Unlike undergradautes, part of a graduate student's contract may include work for the university (generally as a TA or running labs) and your advisor.

I acccepted my current graduate position with the explicit understanding that I would not have to pay tuition.  Currently I am in Canada but for my Masters (in the US) I got a stipend of $18,500/year and the university gave me a graduate student tuition waiver of ~$20,000 each year.  My significant other had a similar situation.  Under the new House GOP plan we would be taxed as if we earned about $80,000/year, even though our monthly combined take-home pay was $2,800 ($34,500/yr).
"Do not confuse complexity with superiority"

Kell7279

  • 5 O'Clock Shadow
  • *
  • Posts: 19
Re: Graduate Student Taxes under House GOP Plan
« Reply #2 on: December 06, 2017, 04:37:21 PM »
Exactly. People really don't understand. Paying tax on money that you never see (especially because the amount of money graduate students don't see is sometimes double their actual incomes) is crazy. I also don't understand the rationale for treating tuition waivers at the graduate level differently than scholarships at the undergraduate level. I was fortunate enough to get a huge chunk of my undergraduate degree paid for by scholarships from my university as well as outside sources, and none of them were treated as "income" because that would just be nuts. Why do people think some other logic applies to graduate school?

I sent that spreadsheet out to my department and had a request from someone to upload a video to Youtube with a link to a publicly available Google doc to better facilitate sharing. Here it is, in case anyone wants to share:https://youtu.be/iE0V0N_ABl4

foobar

  • Pencil Stache
  • ****
  • Posts: 733
Re: Graduate Student Taxes under House GOP Plan
« Reply #3 on: December 09, 2017, 10:45:37 AM »
Exactly. People really don't understand. Paying tax on money that you never see (especially because the amount of money graduate students don't see is sometimes double their actual incomes) is crazy. I also don't understand the rationale for treating tuition waivers at the graduate level differently than scholarships at the undergraduate level.

Taxing scholarship money as income would offend a lot more of the republican base than taxing grad students. And yes grad students should be taxed on the value of their education. If you don't tax transactions like that you create incentives to shift income around to avoid taxation. But another way, why should I subsidize your life choices? And yes it sucks to have your taxes raised. And I can't imagine why this is high on anyones list  of things that need to be fixed.

Cranky

  • Pencil Stache
  • ****
  • Posts: 744
Re: Graduate Student Taxes under House GOP Plan
« Reply #4 on: December 09, 2017, 10:54:01 AM »
We need a more educated population and should increase incentives for that, not reduce them.

Until 1984, graduate stipends were  nontaxable as well.

maizeman

  • Handlebar Stache
  • *****
  • Posts: 1648
  • Location: The World of Tomorrow
Re: Graduate Student Taxes under House GOP Plan
« Reply #5 on: December 09, 2017, 11:09:56 AM »
If you don't tax transactions like that you create incentives to shift income around to avoid taxation. But another way, why should I subsidize your life choices? And yes it sucks to have your taxes raised. And I can't imagine why this is high on anyones list  of things that need to be fixed.

Are you saying that if we don't tax grad students because colleges don't charge them tuition, we're creating a perverse incentive for grad students to negotiate with colleges to be paid even less than they are now in exchange for the colleges raising the amount of tuition which they already aren't charging them?

Because that seems unlikely to me. But maybe I am misunderstanding the point you are trying to make.
"Itís a selective retirement," Richard explained, "a retirement from boring s**t."

My source code & my journal

nereo

  • Walrus Stache
  • *******
  • Posts: 6849
  • Location: la belle province
    • Here's how you can support science today:
Re: Graduate Student Taxes under House GOP Plan
« Reply #6 on: December 09, 2017, 01:31:59 PM »
If you don't tax transactions like that you create incentives to shift income around to avoid taxation. But another way, why should I subsidize your life choices? And yes it sucks to have your taxes raised. And I can't imagine why this is high on anyones list  of things that need to be fixed.

Are you saying that if we don't tax grad students because colleges don't charge them tuition, we're creating a perverse incentive for grad students to negotiate with colleges to be paid even less than they are now in exchange for the colleges raising the amount of tuition which they already aren't charging them?

Because that seems unlikely to me. But maybe I am misunderstanding the point you are trying to make.

I'm not sure I understand your point either, foobar. 
Let me put this another way.  Graduate students have no choice regarding tuition - it's something that shows up on our quarterly bill and then 'magically' disappears with the tuition waiver.  Likewise, the university does not see any of that money either.  It's money that never existed.  But the GOP wants to tax that.

Perhaps an analogy would be easier. Imagine you were offered a job managing a country club paying $50,000/year.  As a condition of taking the job the club makes you a member and waives the $75,000 in membership fees.  This was all discussed before you took the job.  You have no choice in the matter, and technically neither does the club due to some complex insurance and employment laws.  Now at tax time you're assessed taxes based on earning $125,000 - about triple your take home pay.  You never received that money, and the club didn't really receive it either. It's money that never existed until tax-time.

For many students it would set up absolutely absurd situations where they would pay 40-60% of their stipend in taxes.
Ironically, unlike undergraduates, graduate students who are "on-grant" are already making money for the university, as the the grant takes overhead from that grant (often 30-40% of the total) and then these individuals are required to work for the university as part of their contract - frequently 20 hours/week. This makes their skilled labor far cheaper than professors or even adjunct faculty.
"Do not confuse complexity with superiority"

adayrider

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Re: Graduate Student Taxes under House GOP Plan
« Reply #7 on: December 09, 2017, 04:06:03 PM »
It is no different than winning a new car. You have to pay the tax on it. Or don't take the car, your choice. Same goes for your country club job, nobody says you have to take the job.
« Last Edit: December 09, 2017, 04:07:50 PM by adayrider »

nereo

  • Walrus Stache
  • *******
  • Posts: 6849
  • Location: la belle province
    • Here's how you can support science today:
Re: Graduate Student Taxes under House GOP Plan
« Reply #8 on: December 09, 2017, 04:14:17 PM »
It is no different than winning a new car. You have to pay the tax on it. Or don't take the car, your choice. Same goes for your country club job, nobody says you have to take the job.
your solution is for people not to get graduate degrees?
If you win a car - there's a physical car that was purchased by someone and then gifted to you
"Do not confuse complexity with superiority"

chasesfish

  • Handlebar Stache
  • *****
  • Posts: 1798
  • Location: Texas
    • Years in the making, I created a journal!
Re: Graduate Student Taxes under House GOP Plan
« Reply #9 on: December 09, 2017, 04:26:04 PM »
I'm going to ask a really dumb question here and I'm not trying to dump gasoline on a fire:

Outside of FICA/Social Security, would a graduate student living on a stipend and in-kind tuition really have federal income tax liabilities if this money was classified as income?  They would have to be "making it rain" in other ways for this to really matter.

I work for a for-profit institution and looked into getting my MBA.   That money is considered taxable income to me.  I'm not sure why a graduate student working for a university should get different treatment.

Am I missing something?
Counting down the days until I Stop Ironing Shirts

I occasionally Blog

boridi

  • 5 O'Clock Shadow
  • *
  • Posts: 9
Re: Graduate Student Taxes under House GOP Plan
« Reply #10 on: December 09, 2017, 04:37:51 PM »
I'm going to ask a really dumb question here and I'm not trying to dump gasoline on a fire:

Outside of FICA/Social Security, would a graduate student living on a stipend and in-kind tuition really have federal income tax liabilities if this money was classified as income?  They would have to be "making it rain" in other ways for this to really matter.

I work for a for-profit institution and looked into getting my MBA.   That money is considered taxable income to me.  I'm not sure why a graduate student working for a university should get different treatment.

Am I missing something?
On top of a 15-30k stipend, state school students will have an extra ~15-20k in income. 40k+ total income. Private school graduate students may have an extra 50k in income. Perhaps it would pressure private schools to decrease tuition.

nereo

  • Walrus Stache
  • *******
  • Posts: 6849
  • Location: la belle province
    • Here's how you can support science today:
Re: Graduate Student Taxes under House GOP Plan
« Reply #11 on: December 09, 2017, 04:52:53 PM »
Outside of FICA/Social Security, would a graduate student living on a stipend and in-kind tuition really have federal income tax liabilities if this money was classified as income?  They would have to be "making it rain" in other ways for this to really matter.
Did you look at the spreadsheet provided by the OP?
"Do not confuse complexity with superiority"

maizeman

  • Handlebar Stache
  • *****
  • Posts: 1648
  • Location: The World of Tomorrow
Re: Graduate Student Taxes under House GOP Plan
« Reply #12 on: December 09, 2017, 05:22:33 PM »
I'm going to ask a really dumb question here and I'm not trying to dump gasoline on a fire:

Outside of FICA/Social Security, would a graduate student living on a stipend and in-kind tuition really have federal income tax liabilities if this money was classified as income?  They would have to be "making it rain" in other ways for this to really matter.

I work for a for-profit institution and looked into getting my MBA.   That money is considered taxable income to me.  I'm not sure why a graduate student working for a university should get different treatment.

Am I missing something?

Most single grad students are going to be making enough to owe federal income tax.

A grad student in my field might be living on a stipend of $24,000 which would mean they owed ~$1,500 in federal income tax. Add on taxes on another $15,000 in money the university pays to itself but which the grad student now has to pay income taxes on and that increases to ~$3,800. So call it a $2,300 or 10% cut in after tax income in this scenario (a bit more if their state uses federal AGI to calculate state income tax liability).

I'll never be a grad student again, so this doesn't effect me directly, but I'd say I and people like me are much better able to absorb a 10% decrease in after tax income (which is what I was looking at in at least one iteration of the current tax proposal) than folks making less than half the median income.

Edit: I think we get a skewed sense of how much money you can make without paying federal income tax here on the board because so many posters are married, are supporting kids, and are able to make maximum contributions to 401k/IRAs.
« Last Edit: December 09, 2017, 05:24:11 PM by maizeman »
"Itís a selective retirement," Richard explained, "a retirement from boring s**t."

My source code & my journal

MMbergmann

  • 5 O'Clock Shadow
  • *
  • Posts: 33
Re: Graduate Student Taxes under House GOP Plan
« Reply #13 on: December 09, 2017, 06:56:08 PM »
The car metaphor works. They could choose to just pay the tuition to avoid taxable income.

adayrider

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Re: Graduate Student Taxes under House GOP Plan
« Reply #14 on: December 09, 2017, 07:53:21 PM »
It is no different than winning a new car. You have to pay the tax on it. Or don't take the car, your choice. Same goes for your country club job, nobody says you have to take the job.
your solution is for people not to get graduate degrees?
If you win a car - there's a physical car that was purchased by someone and then gifted to you



If the education has no physical value then why does it cost me so much to send my kid to school.

nereo

  • Walrus Stache
  • *******
  • Posts: 6849
  • Location: la belle province
    • Here's how you can support science today:
Re: Graduate Student Taxes under House GOP Plan
« Reply #15 on: December 10, 2017, 06:22:46 AM »
The car metaphor works. They could choose to just pay the tuition to avoid taxable income.
That's an absurd suggestion.  If the student chooses to pay the tuition instead of taking the tuition waiver, in most cases he or she would wind up paying far more in tuition then they bring in as a stipend.  Using the OP's numbers, that would put the graduate student paying $13,000 more in tuition than their entire take-home pay.

Like maizeman, this proposal won't influence me directly as I am in my final semester. But in most cases tuition ≥ stipend, and neither side ever sees this money.

Upthread someone mentioned that tuitions need to come down, and I whole heartedly agree.  We had another topic on why college costs have been rising faster than inflation, but one of the core reasons is that direct  state funding has dropped like a rock since 2000, and enrollment has increased about 45%. Federal funding has shifted away from direct funding to Pell grants and loans, and tuitions have had to make up the shortfall in funding - hence the fees have gone up, a lot. As recently as the late 1990s many state universities (including the University of California system, the largest in the country) could offer free tuition to in-state residents.  That's no longer the case.

Regardless, this tax proposal won't do anything to lower tuition. What it will do is add an additional cost of several thousand$ to every graduate student per year - money that won't go to the university at all. The university then has two choices; try to make up the difference by increasing student stipends (thereby increasing their operating costs) or change nothing and watch as graduate school becomes even more financially unobtainable for many (increases financial inequality).
The net result is money - in the form of taxes - flowing out of education.

"Do not confuse complexity with superiority"

Hargrove

  • Pencil Stache
  • ****
  • Posts: 544
Re: Graduate Student Taxes under House GOP Plan
« Reply #16 on: December 10, 2017, 08:26:19 AM »
It's really disappointing that this turned into "well, I don't care about grad students, let them do something else," or "they could choose to pay the tuition."

Do you like having teachers? Because teacher pay is pretty awful in most places, so I think twisting the screw on grad pay may create a tiny little social problem. Social policy is developed for the good of the society (in the best-case scenario, anyway). No one cares if you "don't want to subsidize them." You're NOT SUBSIDIZING THEM. There is no money changing hands! Their work is like a paid internship, and the pay already sucks!

Saying "let them do something else" is really ignorant. Medical school degrees, for example, are massively subsidized by the government via other means and have been for a long time. That's because med students already leave with 100k+ in debt on 60-80 hour work weeks for most of a decade, and we want people to still want to be doctors - that's a case of a real subsidy, and whether you love it or not, "be something else" represents a brave new doctorless society you won't actually want to live in.

chasesfish

  • Handlebar Stache
  • *****
  • Posts: 1798
  • Location: Texas
    • Years in the making, I created a journal!
Re: Graduate Student Taxes under House GOP Plan
« Reply #17 on: December 10, 2017, 09:19:40 AM »
Outside of FICA/Social Security, would a graduate student living on a stipend and in-kind tuition really have federal income tax liabilities if this money was classified as income?  They would have to be "making it rain" in other ways for this to really matter.
Did you look at the spreadsheet provided by the OP?

I get it...

Its similar to when I looked into getting my MBA, two years was going to cost around $90,000 in total.   My employer would pay $81,000, leaving me with $9,000 to pay.  Except for that $81,000 became additional tax liability.  Fortunately I live in Texas and am already over the social security cap, it still would have cost me a tax outlay of $22,680.

In-kind compensation has always been and will always be a huge point of argument when it comes to what is and isn't income with government.  Based on what I'm seeing, graduate students working for universities have been preivously granted a different set of rules for tutition as compensation than prviate employees.   Right or wrong?  Not for me to judge.

Its not too different than the 20 year debate on carried interest and if a hedgie rolls his/her fees back into an investment and then takes the gains 2-3 years later, is that a capital gain or is that normal compensation?

Counting down the days until I Stop Ironing Shirts

I occasionally Blog

adayrider

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Re: Graduate Student Taxes under House GOP Plan
« Reply #18 on: December 10, 2017, 09:40:28 AM »
It's hard to believe that someone gets a free burger doesn't relize that somebody had to pay for the hamburger, bun, lettuce, tomato, ketchup. And in order to buy these they paid taxes usually first. The reason an aspirin cost 50 bucks when your in the hospital is because the 49 people ahead of you didn't pay for it.

Someone paid for it I promise you that much.

Paul der Krake

  • Magnum Stache
  • ******
  • Posts: 3672
  • Age: 9
  • Warned Member
Re: Graduate Student Taxes under House GOP Plan
« Reply #19 on: December 10, 2017, 09:55:34 AM »
I agree in principle that benefits in kind should be taxed, because that's the fair thing to do. However I don't see anything in this bill to tax the tuition from the GI bill, or health insurance (private or public).

It's clearly a frontal attack on a population that the right has learned to despise.

nereo

  • Walrus Stache
  • *******
  • Posts: 6849
  • Location: la belle province
    • Here's how you can support science today:
Re: Graduate Student Taxes under House GOP Plan
« Reply #20 on: December 10, 2017, 11:46:58 AM »
Outside of FICA/Social Security, would a graduate student living on a stipend and in-kind tuition really have federal income tax liabilities if this money was classified as income?  They would have to be "making it rain" in other ways for this to really matter.
Did you look at the spreadsheet provided by the OP?

I get it...

Its similar to when I looked into getting my MBA, two years was going to cost around $90,000 in total.   My employer would pay $81,000, leaving me with $9,000 to pay.  Except for that $81,000 became additional tax liability.  Fortunately I live in Texas and am already over the social security cap, it still would have cost me a tax outlay of $22,680.

Well the difference I see in these two scenarios is that your employer transferred $81,000 to a university to pay for your MBA. With a tuition waiver there's no transfer of funds.  Its unfortunate that those funds increased your taxable liability, and personally I don't believe that should be the case. If I were to go get an MBA I would have to pay the university $81k as well.

It's hard to believe that someone gets a free burger doesn't relize that somebody had to pay for the hamburger, bun, lettuce, tomato, ketchup. And in order to buy these they paid taxes usually first.
I believe there's a fundamental misunderstanding of how graduate students are paid here.
The most common method is through grants.  Here's a typical example using numbers taken from our most recent grant. 
Prof MMM from M-University was awarded a 3 year federal grant.  That grant had salary "stipends" for two PhD students at the university required $24,000/year. Per university-bartering agreement the 4th year of stipend will come out of the operating budget of the department.
Now all universities and research institutions charge overhead on their grants.  30% is pretty typical (though more and more are edging above 40% with cuts direct state and federal aid).  Overhead pays to keep the university running - what I believe you were referring to with the bun, lettuce, onions, etc. It helps cover the costs for teh building and utilities, staff salaries, equipment etc.
2 students x 3 years x $24,000 = $144,000 + $43,200 = $187,200.  That's just for those two students, and its analogues to payroll in a private business.  that money is all taxed (e.g. FICA/SS and state and federal income tax).  The remaining budget in the grant (also subject to the 30% overhead) pays for everything else; lab equipment, travel, publication fees etc. Often part Prof MMM's salary will also come from the grant (called "soft money" - or non-guaranteed salary).  This is also why graduate students bring in more money than they cost in expenses, and a core reason for not charging them for tuition.
In return for their stipend the graduate students are contract employees for the university, typically owing 20 hours/week teaching classes and running the labs.
At no point is there money coming into the unviersity coffers for tuition, nor are there additional funds appearing in the grad-students' bank accounts.

Some people obviously see no problem with this particular tax proposal, and if after reading these arguments and the OP's data if that's still the case we'll just have to agree to disagree.

Personally my issues with it are two-fold
i) I believe its wrong to place such a large tax burden on people who's take-home pay is around the bottom quartile mark. It's even more egregious when that money is being paid from anyone to any other entity.

ii) its net effect will be to cut funding from higher education. Admittedly this is a philisophical argument but in general I do not support proposals which reduce funding for advanced education, and I particularly oppose the when they do so by making it more expensive for students to get a masters or PhD.

"Do not confuse complexity with superiority"

MDM

  • Walrus Stache
  • *******
  • Posts: 7222
Re: Graduate Student Taxes under House GOP Plan
« Reply #21 on: December 10, 2017, 12:03:46 PM »
...
That grant had salary "stipends" for two PhD students at the university required $24,000/year.
...graduate students bring in more money than they cost in expenses, and a core reason for not charging them for tuition.
In return for their stipend the graduate students are contract employees for the university, typically owing 20 hours/week teaching classes and running the labs.
At no point is there money coming into the university coffers for tuition, nor are there additional funds appearing in the grad-students' bank accounts.
What if graduate schools stop charging tuition?  In other words, grad students apply for part-time jobs, get paid for them, and take "on-the-job training classes" in their spare time.

Might need to rework the grant process, but would this be a viable way, in effect, to keep more or less the status quo should the House plan pass?

nereo

  • Walrus Stache
  • *******
  • Posts: 6849
  • Location: la belle province
    • Here's how you can support science today:
Re: Graduate Student Taxes under House GOP Plan
« Reply #22 on: December 10, 2017, 12:52:48 PM »
...
That grant had salary "stipends" for two PhD students at the university required $24,000/year.
...graduate students bring in more money than they cost in expenses, and a core reason for not charging them for tuition.
In return for their stipend the graduate students are contract employees for the university, typically owing 20 hours/week teaching classes and running the labs.
At no point is there money coming into the university coffers for tuition, nor are there additional funds appearing in the grad-students' bank accounts.
What if graduate schools stop charging tuition?  In other words, grad students apply for part-time jobs, get paid for them, and take "on-the-job training classes" in their spare time.

Might need to rework the grant process, but would this be a viable way, in effect, to keep more or less the status quo should the House plan pass?

This very subject came up at our last faculty meeting, and indeed basically there at least conceptually agreed that it would be better simply not to charge grad students tuition in the first place.  however the current rules and regulations prevent this.  From what I understood, despite the work obligations graduate students are still seen as 'students' by the IRS, and even if the university declared that our true tuition as $0 the IRS would give us imputed income equal to that of the undergraduates.  I'm a scientist and not well versed in tax-law, so I can't much more on that.  It would be great to return to a time when there was no tuition for in-state residents (the norm for many public universities as recently as the 1980s and 90s) - but the direct funding hasn't kept up with increases in both costs and enrollment.

The problem with just changing the granting process is that the total sum of available federal grant dollars is also at question.  We've been living off continuing resolutions but funds in 2017 are roughly the same despite some calls to drastically cut them back (which seems a definite possibility).  If you 'add in' an extra ~$4-5k per student per year to cover the increases in their tax bill this will decrease the amount left to do actual research by the same amount.  In otherwords, it's zero-sum.  It would also be a bit ham-handed to implement at the grant level - some universities have tuitions (e.g. Yale) exceeding $40k, while others are around the $18k mark (UCLA, Berkeley). Either each university would need to come up with their own "tax-remediation" formula and add it into the overhead/stipend categories, or the outcome will be very lopsided. Currently the cost of the tuition isn't a consideration for a graduate student because its never paid - by the student or the grant or the university. It exists only due to the undergrads. S
"Do not confuse complexity with superiority"

Cranky

  • Pencil Stache
  • ****
  • Posts: 744
Re: Graduate Student Taxes under House GOP Plan
« Reply #23 on: December 10, 2017, 01:32:17 PM »
Outside of FICA/Social Security, would a graduate student living on a stipend and in-kind tuition really have federal income tax liabilities if this money was classified as income?  They would have to be "making it rain" in other ways for this to really matter.
Did you look at the spreadsheet provided by the OP?

I get it...

Its similar to when I looked into getting my MBA, two years was going to cost around $90,000 in total.   My employer would pay $81,000, leaving me with $9,000 to pay.  Except for that $81,000 became additional tax liability.  Fortunately I live in Texas and am already over the social security cap, it still would have cost me a tax outlay of $22,680.

In-kind compensation has always been and will always be a huge point of argument when it comes to what is and isn't income with government.  Based on what I'm seeing, graduate students working for universities have been preivously granted a different set of rules for tutition as compensation than prviate employees.   Right or wrong?  Not for me to judge.

Its not too different than the 20 year debate on carried interest and if a hedgie rolls his/her fees back into an investment and then takes the gains 2-3 years later, is that a capital gain or is that normal compensation?

Would you continue working while you got your MBA?

When my dh was getting his PhD, that was a full time job, really more than full time, and I know that some programs donít allow grad students to work outside their program. I do think that it will be a huge disincentive.

Should all benefits be taxed? Employer provided health insurance?

maizeman

  • Handlebar Stache
  • *****
  • Posts: 1648
  • Location: The World of Tomorrow
Re: Graduate Student Taxes under House GOP Plan
« Reply #24 on: December 10, 2017, 02:44:48 PM »
i) I believe its wrong to place such a large tax burden on people who's take-home pay is around the bottom quartile mark. It's even more egregious when that money is being paid from anyone to any other entity.

This is my main problem with this part of the proposed tax legislation. If taxing grad student tuition waivers was an unavoidable consequence of a rule which was also going to tax all sorts of other employer provided benefits to create a tax code with fewer perverse incentives, that would be one thing.

But this is a narrowly targeted rule aimed specifically at increasing the taxes solely of a group of people who near-universally make little money while working extremely long hours. And I am still waiting for @foobar to explain what perverse incentives he or she thinks could be corrected by imposing this particular new tax.

I do think some of the push back against this rule has been misguided in that they focus on relatively extreme cases where most of the tuition waver would be up in the higher tax brackets, which also makes people think grad students are making higher salaries than they actually do.  Running the numbers for my own students (some married, some single, supported on different types of grants or fellowships), I generally get estimates that this would cost them $100-$250 month in extra taxes. But when you're living on $1500-$2,000/month of income, a $100-$250/month cut in your income is a big deal. If we need to raise more tax revenue, I would much rather see taxes raised on me and people making incomes like mine than on people who are already living right on the edge.
"Itís a selective retirement," Richard explained, "a retirement from boring s**t."

My source code & my journal

jean

  • 5 O'Clock Shadow
  • *
  • Posts: 40
Re: Graduate Student Taxes under House GOP Plan
« Reply #25 on: December 10, 2017, 02:57:45 PM »
...
That grant had salary "stipends" for two PhD students at the university required $24,000/year.
...graduate students bring in more money than they cost in expenses, and a core reason for not charging them for tuition.
In return for their stipend the graduate students are contract employees for the university, typically owing 20 hours/week teaching classes and running the labs.
At no point is there money coming into the university coffers for tuition, nor are there additional funds appearing in the grad-students' bank accounts.
What if graduate schools stop charging tuition?  In other words, grad students apply for part-time jobs, get paid for them, and take "on-the-job training classes" in their spare time.

Might need to rework the grant process, but would this be a viable way, in effect, to keep more or less the status quo should the House plan pass?

This very subject came up at our last faculty meeting, and indeed basically there at least conceptually agreed that it would be better simply not to charge grad students tuition in the first place. 

I'm a little confused. I know for certain that (at least sometimes, if not always) tuition for grad students are charged to grants. Maybe this is only the case when the student doesn't have additional TA duties and is truly just able to focus on the research.

chasesfish

  • Handlebar Stache
  • *****
  • Posts: 1798
  • Location: Texas
    • Years in the making, I created a journal!
Re: Graduate Student Taxes under House GOP Plan
« Reply #26 on: December 10, 2017, 03:05:08 PM »
Outside of FICA/Social Security, would a graduate student living on a stipend and in-kind tuition really have federal income tax liabilities if this money was classified as income?  They would have to be "making it rain" in other ways for this to really matter.
Did you look at the spreadsheet provided by the OP?

I get it...

Its similar to when I looked into getting my MBA, two years was going to cost around $90,000 in total.   My employer would pay $81,000, leaving me with $9,000 to pay.  Except for that $81,000 became additional tax liability.  Fortunately I live in Texas and am already over the social security cap, it still would have cost me a tax outlay of $22,680.

In-kind compensation has always been and will always be a huge point of argument when it comes to what is and isn't income with government.  Based on what I'm seeing, graduate students working for universities have been preivously granted a different set of rules for tutition as compensation than prviate employees.   Right or wrong?  Not for me to judge.

Its not too different than the 20 year debate on carried interest and if a hedgie rolls his/her fees back into an investment and then takes the gains 2-3 years later, is that a capital gain or is that normal compensation?

Would you continue working while you got your MBA?

When my dh was getting his PhD, that was a full time job, really more than full time, and I know that some programs donít allow grad students to work outside their program. I do think that it will be a huge disincentive.

Should all benefits be taxed? Employer provided health insurance?

I ultimately chose not to get my MBA due to the cost/tax liability.

Yes, I do think all employer benefits should be taxed, including health insurance.  I also want them to dislodge retirement plans from employers and just make the IRA limits the same for all.

I believe in fairness
Counting down the days until I Stop Ironing Shirts

I occasionally Blog

nereo

  • Walrus Stache
  • *******
  • Posts: 6849
  • Location: la belle province
    • Here's how you can support science today:
Re: Graduate Student Taxes under House GOP Plan
« Reply #27 on: December 10, 2017, 03:17:07 PM »
...
That grant had salary "stipends" for two PhD students at the university required $24,000/year.
...graduate students bring in more money than they cost in expenses, and a core reason for not charging them for tuition.
In return for their stipend the graduate students are contract employees for the university, typically owing 20 hours/week teaching classes and running the labs.
At no point is there money coming into the university coffers for tuition, nor are there additional funds appearing in the grad-students' bank accounts.
What if graduate schools stop charging tuition?  In other words, grad students apply for part-time jobs, get paid for them, and take "on-the-job training classes" in their spare time.

Might need to rework the grant process, but would this be a viable way, in effect, to keep more or less the status quo should the House plan pass?

This very subject came up at our last faculty meeting, and indeed basically there at least conceptually agreed that it would be better simply not to charge grad students tuition in the first place. 

I'm a little confused. I know for certain that (at least sometimes, if not always) tuition for grad students are charged to grants. Maybe this is only the case when the student doesn't have additional TA duties and is truly just able to focus on the research.
Tuition can be charged to grants, but it's far from universal.  Certain granting agencies don't allow it, and for many departments (e.g. social sciences, humanities in particular) this is the exception and not the rule. In practice it becomes accounting BS that annoys me almost as much as this proposal. When allowed a PI (the person who asks for the grant) may request tuition which flows to the university (not the student).  When it isn't allowed the student is given a waiver, since essentially no grad student pays tuition. Sometimes that portion will be exchanged for funds that flow back into the department.  In the end the university takes as much as they possibly can from each grant.  Student stipends are fixed and negotiated by the unions.
"Do not confuse complexity with superiority"

maizeman

  • Handlebar Stache
  • *****
  • Posts: 1648
  • Location: The World of Tomorrow
Re: Graduate Student Taxes under House GOP Plan
« Reply #28 on: December 11, 2017, 10:48:21 AM »
Well this would appear to be a positive sign.

Quote
Representative Pete Sessions (R-TX) and 30 other Republican members of Congressóincluding more than 25 House Representativesósent a letter to House and Senate leaders on Thursday (December 7), opposing the proposed tax on graduate tuition waivers.

https://www.the-scientist.com/?articles.view/articleNo/51125/title/Two-Dozen-House-Republicans-Do-an-About-Face-on-Tuition-Tax/
"Itís a selective retirement," Richard explained, "a retirement from boring s**t."

My source code & my journal

jean

  • 5 O'Clock Shadow
  • *
  • Posts: 40
Re: Graduate Student Taxes under House GOP Plan
« Reply #29 on: December 11, 2017, 11:16:17 AM »
Tuition can be charged to grants, but it's far from universal.  Certain granting agencies don't allow it, and for many departments (e.g. social sciences, humanities in particular) this is the exception and not the rule. In practice it becomes accounting BS that annoys me almost as much as this proposal. When allowed a PI (the person who asks for the grant) may request tuition which flows to the university (not the student).  When it isn't allowed the student is given a waiver, since essentially no grad student pays tuition. Sometimes that portion will be exchanged for funds that flow back into the department.  In the end the university takes as much as they possibly can from each grant.  Student stipends are fixed and negotiated by the unions.
I see.  My knowledge comes from a science/engineering perspective. I think tuition charged to grants is more common in these dicipliines, although I don't know enough to know how common it is.  I just know it happens.  And yes, the university tries to scrape every penny they can into their coffers! 

GreenEggs

  • Bristles
  • ***
  • Posts: 285
  • Location: NC mountains
Re: Graduate Student Taxes under House GOP Plan
« Reply #30 on: December 11, 2017, 11:32:26 AM »
It's nice to see Trump & the GOP screwing grad students, because that's a group that is smart enough to retaliate!  ;)

I'm looking forward to witnessing it!

seattlecyclone

  • Magnum Stache
  • ******
  • Posts: 3988
  • Age: 33
  • Location: Seattle, WA
Re: Graduate Student Taxes under House GOP Plan
« Reply #31 on: December 11, 2017, 12:38:00 PM »
I've been a grad student. I have several friends and family members who are or have been grad students as well. I'm well aware that taxing these tuition waivers would make a pretty big difference in the financial equation for grad school, big enough that many students would choose not to pursue a graduate degree if this tax change was implemented.

That said, a graduate tuition waiver is a thing of value that is provided to certain graduate students as part of an employment contract. Most things of value that are given to an employee by an employer are subject to income taxation. There are certain exceptions that are seen as being in the public interest. I think it's fair to evaluate graduate tuition waivers in this context. The graduate student is receiving something of value. If we're not going to tax them on it, is the country getting its money's worth out of that tax exemption?

Graduate students are impoverished enough as it is; few could afford to take a $10k (or whatever) cut in their net pay. Universities would certainly have to increase their grad student stipends to make up for at least part of the tax hit if they want to attract people to do research. Given limited funding, that would probably mean fewer funded grad students overall. Would that be such a bad thing though? Seems like there are too many graduate students in a lot of fields at the moment. Only a fraction of new PhDs end up in the tenure-track positions they spent years on their degree working to qualify for. Maybe it's time to change the incentives around graduate school to bring supply and demand closer to balance?
I made a blog! https://seattlecyclone.com/

The Roth IRA was named after William Roth, who represented Delaware in the US senate from 1971-2001. "Roth" is a name, not an acronym. There's no need to capitalize the final three letters.

maizeman

  • Handlebar Stache
  • *****
  • Posts: 1648
  • Location: The World of Tomorrow
Re: Graduate Student Taxes under House GOP Plan
« Reply #32 on: December 11, 2017, 01:05:13 PM »
If we were going to start taxing more non-cash benefits which are provided to employees, wouldn't it make much more sense to start with things like healthcare benefits?

1) There's a lot more potential revenue there.
2) There is a significantly more convincing case that making employer provided healthcare tax exempt is actually causing market distortions than that tuition wavers cause market distortions.
3) We have much more reliable data on what the fair market value of health insurance plans are. Lots of people buy health insurance as individuals, since almost no grad students pay tuition, it's not clear that the nominal price universities list for graduate tuition is a good representation of the actual fair market value of what is being provided.

Graduate students are impoverished enough as it is; few could afford to take a $10k (or whatever) cut in their net pay. Universities would certainly have to increase their grad student stipends to make up for at least part of the tax hit if they want to attract people to do research. Given limited funding, that would probably mean fewer funded grad students overall. Would that be such a bad thing though? Seems like there are too many graduate students in a lot of fields at the moment. Only a fraction of new PhDs end up in the tenure-track positions they spent years on their degree working to qualify for. Maybe it's time to change the incentives around graduate school to bring supply and demand closer to balance?

There are certainly lots of fields and subfields where grad students are being overproduced relative to the combined demand from both academia and private industry. There are also lots of other fields where there are significant shortages. I agree with you that it be good to figure out a way to match production and demand for students, but my own view is that taxing tuition remission is not a good way to do so because it will exacerbate the shortages (machine learning, quantitative genetics, statistics/data science, etc) while at the same time probably not being enough to completely correct the fields with over supplies relative to jobs (musicology, ecology,  comparative literature, etc).
"Itís a selective retirement," Richard explained, "a retirement from boring s**t."

My source code & my journal

Trudie

  • Handlebar Stache
  • *****
  • Posts: 1460
Re: Graduate Student Taxes under House GOP Plan
« Reply #33 on: December 11, 2017, 01:09:12 PM »
To the original poster:

Scan and fax or email to your legislators.  It's a compelling example.  They need to understand the tax revolt that will ensue if they pass this crappy bill.

seattlecyclone

  • Magnum Stache
  • ******
  • Posts: 3988
  • Age: 33
  • Location: Seattle, WA
Re: Graduate Student Taxes under House GOP Plan
« Reply #34 on: December 11, 2017, 01:45:12 PM »
If we were going to start taxing more non-cash benefits which are provided to employees, wouldn't it make much more sense to start with things like healthcare benefits?

1) There's a lot more potential revenue there.
2) There is a significantly more convincing case that making employer provided healthcare tax exempt is actually causing market distortions than that tuition wavers cause market distortions.
3) We have much more reliable data on what the fair market value of health insurance plans are. Lots of people buy health insurance as individuals, since almost no grad students pay tuition, it's not clear that the nominal price universities list for graduate tuition is a good representation of the actual fair market value of what is being provided.

I agree 100% about untaxed health insurance benefits. I'd get rid of those in a heartbeat, and am sympathetic to the idea that untaxed graduate tuition is more justifiable than untaxed health insurance.

Is it correct to say that "almost no grad students pay tuition"? I'd like to see data on that. Many universities use their master's degrees at least as a profit center, so the tuition is very much not an accounting fiction in those programs. I also shared an apartment one year with a woman who was working on her dissertation in Spanish and didn't have funding anymore, so she worked in a restaurant to pay the bills. I'm pretty sure she was paying tuition as a PhD student, if only for a couple of credit hours. This seems hardly unheard of.
I made a blog! https://seattlecyclone.com/

The Roth IRA was named after William Roth, who represented Delaware in the US senate from 1971-2001. "Roth" is a name, not an acronym. There's no need to capitalize the final three letters.

maizeman

  • Handlebar Stache
  • *****
  • Posts: 1648
  • Location: The World of Tomorrow
Re: Graduate Student Taxes under House GOP Plan
« Reply #35 on: December 11, 2017, 02:06:36 PM »
Hmm, you're right, I'm going off of anecdotal data and my own experience. I'm not sure if there are good numbers that would break down the proportion of grad students who are paying their own way tuition wise (as opposed to either TAs/RAs with tuition remission, having tuition paid out of a federal grant, or having tuition paid out a fellowship like the NSF GRFP, none of which are going to provide an effective price discovery mechanism), but if there is, that data certainly help clarify things a lot.

For the woman you mention, it wouldn't surprise me at all if she was on Filing Fee Status (essentially you're done with your coursework, but haven't completely your dissertation, so the university lets you pay only a couple of hundred bucks to remain counted as an active enrollee while you finish up your thesis.)
"Itís a selective retirement," Richard explained, "a retirement from boring s**t."

My source code & my journal

foobar

  • Pencil Stache
  • ****
  • Posts: 733
Re: Graduate Student Taxes under House GOP Plan
« Reply #36 on: December 11, 2017, 02:39:51 PM »
If you don't tax transactions like that you create incentives to shift income around to avoid taxation. But another way, why should I subsidize your life choices? And yes it sucks to have your taxes raised. And I can't imagine why this is high on anyones list  of things that need to be fixed.

Are you saying that if we don't tax grad students because colleges don't charge them tuition, we're creating a perverse incentive for grad students to negotiate with colleges to be paid even less than they are now in exchange for the colleges raising the amount of tuition which they already aren't charging them?

Because that seems unlikely to me. But maybe I am misunderstanding the point you are trying to make.

I'm not sure I understand your point either, foobar. 
Let me put this another way.  Graduate students have no choice regarding tuition - it's something that shows up on our quarterly bill and then 'magically' disappears with the tuition waiver.  Likewise, the university does not see any of that money either.  It's money that never existed.  But the GOP wants to tax that.

Perhaps an analogy would be easier. Imagine you were offered a job managing a country club paying $50,000/year.  As a condition of taking the job the club makes you a member and waives the $75,000 in membership fees.  This was all discussed before you took the job.  You have no choice in the matter, and technically neither does the club due to some complex insurance and employment laws.  Now at tax time you're assessed taxes based on earning $125,000 - about triple your take home pay.  You never received that money, and the club didn't really receive it either. It's money that never existed until tax-time.

For many students it would set up absolutely absurd situations where they would pay 40-60% of their stipend in taxes.
Ironically, unlike undergraduates, graduate students who are "on-grant" are already making money for the university, as the the grant takes overhead from that grant (often 30-40% of the total) and then these individuals are required to work for the university as part of their contract - frequently 20 hours/week. This makes their skilled labor far cheaper than professors or even adjunct faculty.

Of course the grad student has a choice. They could chose not to got to school. Or they could say I want more money to do the job. Or they will choose to go to cheaper schools.

Would it be ok if I got a free country club membership that I got to enjoy the benefits of and didn't have to pay a penny in tax? Is it ok if I get a free car and don't have to pay tax? What about a free house? Free food? Current tax law says nope. There is a reason why you have to pay taxes on bartered goods(i.e. if you work on someones house in Hawaii in exchange for a vacation, that is a taxable event). Look at health care for an example of a field where excluding it from taxation has caused all sorts of perverse incentives. Or our housing market where we subsidize houses for rich people while poor people struggle to afford anything.

Obviously going after mortgages (and SALT) is deeply unpopular among the people that are losing a benefit. Going after health care would be even more unpopular.  Nobody cares about grad students though.

But that is all at the theoretical level of how taxation should work. I expect this bill to raise peanuts (on the federal scale) so I sort of wonder why it was included? Somebody out there really hate education?
 

seattlecyclone

  • Magnum Stache
  • ******
  • Posts: 3988
  • Age: 33
  • Location: Seattle, WA
Re: Graduate Student Taxes under House GOP Plan
« Reply #37 on: December 11, 2017, 02:47:31 PM »
(i.e. if you work on someones house in Hawaii in exchange for a vacation, that is a taxable event)

I made a blog! https://seattlecyclone.com/

The Roth IRA was named after William Roth, who represented Delaware in the US senate from 1971-2001. "Roth" is a name, not an acronym. There's no need to capitalize the final three letters.

Jrr85

  • Pencil Stache
  • ****
  • Posts: 567
Re: Graduate Student Taxes under House GOP Plan
« Reply #38 on: December 11, 2017, 03:11:39 PM »
If you don't tax transactions like that you create incentives to shift income around to avoid taxation. But another way, why should I subsidize your life choices? And yes it sucks to have your taxes raised. And I can't imagine why this is high on anyones list  of things that need to be fixed.

Are you saying that if we don't tax grad students because colleges don't charge them tuition, we're creating a perverse incentive for grad students to negotiate with colleges to be paid even less than they are now in exchange for the colleges raising the amount of tuition which they already aren't charging them?

Because that seems unlikely to me. But maybe I am misunderstanding the point you are trying to make.

I'm not sure I understand your point either, foobar. 
Let me put this another way.  Graduate students have no choice regarding tuition - it's something that shows up on our quarterly bill and then 'magically' disappears with the tuition waiver.  Likewise, the university does not see any of that money either.  It's money that never existed.  But the GOP wants to tax that.

Perhaps an analogy would be easier. Imagine you were offered a job managing a country club paying $50,000/year.  As a condition of taking the job the club makes you a member and waives the $75,000 in membership fees.  This was all discussed before you took the job.  You have no choice in the matter, and technically neither does the club due to some complex insurance and employment laws.  Now at tax time you're assessed taxes based on earning $125,000 - about triple your take home pay.  You never received that money, and the club didn't really receive it either. It's money that never existed until tax-time.

For many students it would set up absolutely absurd situations where they would pay 40-60% of their stipend in taxes.
Ironically, unlike undergraduates, graduate students who are "on-grant" are already making money for the university, as the the grant takes overhead from that grant (often 30-40% of the total) and then these individuals are required to work for the university as part of their contract - frequently 20 hours/week. This makes their skilled labor far cheaper than professors or even adjunct faculty.

Of course the grad student has a choice. They could chose not to got to school. Or they could say I want more money to do the job. Or they will choose to go to cheaper schools.

Would it be ok if I got a free country club membership that I got to enjoy the benefits of and didn't have to pay a penny in tax? Is it ok if I get a free car and don't have to pay tax? What about a free house? Free food? Current tax law says nope. There is a reason why you have to pay taxes on bartered goods(i.e. if you work on someones house in Hawaii in exchange for a vacation, that is a taxable event). Look at health care for an example of a field where excluding it from taxation has caused all sorts of perverse incentives. Or our housing market where we subsidize houses for rich people while poor people struggle to afford anything.

Obviously going after mortgages (and SALT) is deeply unpopular among the people that are losing a benefit. Going after health care would be even more unpopular.  Nobody cares about grad students though.

But that is all at the theoretical level of how taxation should work. I expect this bill to raise peanuts (on the federal scale) so I sort of wonder why it was included? Somebody out there really hate education?


I can certainly believe some policy makers hate education.  I have interacted with a lot of people with masters or have even made it to the all but dissertation phase or just gotten "doctorates" that don't require a dissertation, and generally, outside of the engineers, lawyers, accountants, economists, and biologists, I would say that graduate school is somewhere between benign and destructive.  But even in the areas that are exceptions, I'm generally dealing with people who have successfully commercialized their knowledge and managed to provide something of significant value to people (or at worst something people are willing to pay for).  If I spent more time in government and around more of the people with masters and phDs that still don't manage to do anything other than be a lowly paid employee of a "think tank" or underemployed government worker or just an "activist", I might have a much worse opinion on graduate school and whether there might be too much of it. 

maizeman

  • Handlebar Stache
  • *****
  • Posts: 1648
  • Location: The World of Tomorrow
Re: Graduate Student Taxes under House GOP Plan
« Reply #39 on: December 11, 2017, 03:42:21 PM »
I can certainly believe some policy makers hate education.  I have interacted with a lot of people with masters or have even made it to the all but dissertation phase or just gotten "doctorates" that don't require a dissertation, and generally, outside of the engineers, lawyers, accountants, economists, and biologists, I would say that graduate school is somewhere between benign and destructive.  But even in the areas that are exceptions, I'm generally dealing with people who have successfully commercialized their knowledge and managed to provide something of significant value to people (or at worst something people are willing to pay for).  If I spent more time in government and around more of the people with masters and phDs that still don't manage to do anything other than be a lowly paid employee of a "think tank" or underemployed government worker or just an "activist", I might have a much worse opinion on graduate school and whether there might be too much of it. 

Well and this is part of the problem I was also talking about with SeattleCyclone a little bit upthread. PhD degrees and the people who pursue them are a very heterogeneous group, so it's going to be very hard to come to a consensus on what does or doesn't make sense if some people are taking positions based on whether it makes sense to reduce the number of PhDs we train each year in Economics, Statistics, or Machine Learning, and other people are arguing against those positions based on whether or not it makes sense to reduce the number of PhDs we train each year in "Feminist Glaciology" and "Posthumanist Politics of Invasive Squirrels."

If you don't tax transactions like that you create incentives to shift income around to avoid taxation. But another way, why should I subsidize your life choices? And yes it sucks to have your taxes raised. And I can't imagine why this is high on anyones list  of things that need to be fixed.

Are you saying that if we don't tax grad students because colleges don't charge them tuition, we're creating a perverse incentive for grad students to negotiate with colleges to be paid even less than they are now in exchange for the colleges raising the amount of tuition which they already aren't charging them?

Because that seems unlikely to me. But maybe I am misunderstanding the point you are trying to make.
Look at health care for an example of a field where excluding it from taxation has caused all sorts of perverse incentives. Or our housing market where we subsidize houses for rich people while poor people struggle to afford anything.

Obviously going after mortgages (and SALT) is deeply unpopular among the people that are losing a benefit. Going after health care would be even more unpopular.  Nobody cares about grad students though.

I don't disagree at all with the problems created by economic distortions from not taxing mortgage interest or employer provided healthcare. But I still don't understand what economic distortions you're worried about specifically with regard to graduate tuition waivers.
"Itís a selective retirement," Richard explained, "a retirement from boring s**t."

My source code & my journal

foobar

  • Pencil Stache
  • ****
  • Posts: 733
Re: Graduate Student Taxes under House GOP Plan
« Reply #40 on: December 11, 2017, 10:54:25 PM »

I don't disagree at all with the problems created by economic distortions from not taxing mortgage interest or employer provided healthcare. But I still don't understand what economic distortions you're worried about specifically with regard to graduate tuition waivers.

Well for one thing it inflates tuition.  It doesn't affect the people who aren't paying it, but for the ones that are it is a loss. If the school had to pay more (i.e. people wouldn't settle for 15k salaries if they came with 15k tax burdens. They would want 30k), they might decide to hold tuition at say 25k instead of 40k. This affects all the people that are paying full freight. An example in the engineering when I was in school was a TA whose tuition was being paid for by the air force.

Changes like this though are highly disruptive. They aren't something that you should do lightly and without thinking about transition plans.

maizeman

  • Handlebar Stache
  • *****
  • Posts: 1648
  • Location: The World of Tomorrow
Re: Graduate Student Taxes under House GOP Plan
« Reply #41 on: December 12, 2017, 07:24:34 AM »
@foobar And just to clarify a little more, are you worried that students are accepting lower (taxable) salaries in exchange for receiving larger (tax-free) tuition waivers? Or are you saying that if graduate tuition waivers were taxed, total demand for graduate degrees would decline, which would drive down prices for students who had the financial resources to pay their own way, rather than relying on RAs/TAs/Fellowships which covered tuition and provided a stipend?
"Itís a selective retirement," Richard explained, "a retirement from boring s**t."

My source code & my journal

foobar

  • Pencil Stache
  • ****
  • Posts: 733
Re: Graduate Student Taxes under House GOP Plan
« Reply #42 on: December 12, 2017, 09:17:03 AM »
@foobar And just to clarify a little more, are you worried that students are accepting lower (taxable) salaries in exchange for receiving larger (tax-free) tuition waivers? Or are you saying that if graduate tuition waivers were taxed, total demand for graduate degrees would decline, which would drive down prices for students who had the financial resources to pay their own way, rather than relying on RAs/TAs/Fellowships which covered tuition and provided a stipend?

Both. The high level point is that subsidizing grad school in this way is not a free lunch that has no losers and just winners.  Most grad degrees pay enough to cover this tax in a couple of years of working so it is largely a cash flow issue rather than an affordability one. And your degree will not lead to say 50k more earnings over your career, then yeah maybe we should be trying to discourage people from getting those degrees:)

And again, yeah the effects on undergrad are a lot worse. And yeah it is a pretty minor issue in the grand scheme of unfair tax practices.

maizeman

  • Handlebar Stache
  • *****
  • Posts: 1648
  • Location: The World of Tomorrow
Re: Graduate Student Taxes under House GOP Plan
« Reply #43 on: December 12, 2017, 09:57:27 AM »
@foobar And just to clarify a little more, are you worried that students are accepting lower (taxable) salaries in exchange for receiving larger (tax-free) tuition waivers? Or are you saying that if graduate tuition waivers were taxed, total demand for graduate degrees would decline, which would drive down prices for students who had the financial resources to pay their own way, rather than relying on RAs/TAs/Fellowships which covered tuition and provided a stipend?

Both. The high level point is that subsidizing grad school in this way is not a free lunch that has no losers and just winners.

There's no such thing as a free lunch, but some lunches are much better deals than others.

I'm not convinced the first possible interpretation I listed of your statement is true (that colleges are increasing their graduate tuition rates because waiving larger tuition bills makes grad students willing to work for less money than they otherwise would).

The second possible interpretation (that imposing this new tax will decrease both the number of people attending graduate school and the average tuition charged by graduate schools probably is true. However, the way it'll do that is by discouraging people who are highly qualified and would receive the most benefit from grad school (as these are the folks who generally get fellowships/RAs/TAs), while encouraging more people who were at best marginal applicants since they were admitted without any financial support for either tuition or stipend because they'll now have to pay a bit less in tuition.

The first group of people are the ones who are likely to go on and both earn more money and provide more benefit to society as a result of the skills and credentials they get in grad school. The second group are more likely to linger in PhD programs for 7+ years, in many cases won't graduate, and if they do graduate will often find their degrees don't qualify them for any jobs they couldn't have gotten straight out of undergrad.

So imposing a new tax solely on grad students would produce some winners, but it produces a lot more losers (both an the individual and societal levels).
"Itís a selective retirement," Richard explained, "a retirement from boring s**t."

My source code & my journal

foobar

  • Pencil Stache
  • ****
  • Posts: 733
Re: Graduate Student Taxes under House GOP Plan
« Reply #44 on: December 12, 2017, 10:17:50 PM »
@foobar And just to clarify a little more, are you worried that students are accepting lower (taxable) salaries in exchange for receiving larger (tax-free) tuition waivers? Or are you saying that if graduate tuition waivers were taxed, total demand for graduate degrees would decline, which would drive down prices for students who had the financial resources to pay their own way, rather than relying on RAs/TAs/Fellowships which covered tuition and provided a stipend?

Both. The high level point is that subsidizing grad school in this way is not a free lunch that has no losers and just winners.

There's no such thing as a free lunch, but some lunches are much better deals than others.

I'm not convinced the first possible interpretation I listed of your statement is true (that colleges are increasing their graduate tuition rates because waiving larger tuition bills makes grad students willing to work for less money than they otherwise would).

The second possible interpretation (that imposing this new tax will decrease both the number of people attending graduate school and the average tuition charged by graduate schools probably is true. However, the way it'll do that is by discouraging people who are highly qualified and would receive the most benefit from grad school (as these are the folks who generally get fellowships/RAs/TAs), while encouraging more people who were at best marginal applicants since they were admitted without any financial support for either tuition or stipend because they'll now have to pay a bit less in tuition.

The first group of people are the ones who are likely to go on and both earn more money and provide more benefit to society as a result of the skills and credentials they get in grad school. The second group are more likely to linger in PhD programs for 7+ years, in many cases won't graduate, and if they do graduate will often find their degrees don't qualify them for any jobs they couldn't have gotten straight out of undergrad.

So imposing a new tax solely on grad students would produce some winners, but it produces a lot more losers (both an the individual and societal levels).

It is impossible to say what will happen as the system will shift. A grad student might no longer accept a job that pays 50k tuition credit/15k salary. You might hold out for a 50k tuition/30k salary.  For the student is might be break even, the university loses money, the government gains money.  Or maybe the package shifts and the student gets 50k of salary but is require to pay tuition (probably from government loans:))

I will say I would much rather they tax undergraduate also just to be consistent.  I like when things affect tons of people. It provides a much bigger incentive to get it right. If ACA was required for all people between 0-65, the problems would have been worked out in a hurry.

Kell7279

  • 5 O'Clock Shadow
  • *
  • Posts: 19
Re: Graduate Student Taxes under House GOP Plan
« Reply #45 on: December 13, 2017, 05:41:59 PM »
Wow. This really exploded since the last time I logged on. Luckily, it appears the GOP has come to their senses on this issue: https://www.bloomberg.com/news/articles/2017-12-13/tentative-tax-deal-scraps-hit-on-tuition-for-graduate-students


nereo

  • Walrus Stache
  • *******
  • Posts: 6849
  • Location: la belle province
    • Here's how you can support science today:
Re: Graduate Student Taxes under House GOP Plan
« Reply #46 on: December 13, 2017, 07:08:21 PM »
@foobar And just to clarify a little more, are you worried that students are accepting lower (taxable) salaries in exchange for receiving larger (tax-free) tuition waivers? Or are you saying that if graduate tuition waivers were taxed, total demand for graduate degrees would decline, which would drive down prices for students who had the financial resources to pay their own way, rather than relying on RAs/TAs/Fellowships which covered tuition and provided a stipend?

Both. The high level point is that subsidizing grad school in this way is not a free lunch that has no losers and just winners.

There's no such thing as a free lunch, but some lunches are much better deals than others.

I'm not convinced the first possible interpretation I listed of your statement is true (that colleges are increasing their graduate tuition rates because waiving larger tuition bills makes grad students willing to work for less money than they otherwise would).

The second possible interpretation (that imposing this new tax will decrease both the number of people attending graduate school and the average tuition charged by graduate schools probably is true. However, the way it'll do that is by discouraging people who are highly qualified and would receive the most benefit from grad school (as these are the folks who generally get fellowships/RAs/TAs), while encouraging more people who were at best marginal applicants since they were admitted without any financial support for either tuition or stipend because they'll now have to pay a bit less in tuition.

The first group of people are the ones who are likely to go on and both earn more money and provide more benefit to society as a result of the skills and credentials they get in grad school. The second group are more likely to linger in PhD programs for 7+ years, in many cases won't graduate, and if they do graduate will often find their degrees don't qualify them for any jobs they couldn't have gotten straight out of undergrad.

So imposing a new tax solely on grad students would produce some winners, but it produces a lot more losers (both an the individual and societal levels).

It is impossible to say what will happen as the system will shift. A grad student might no longer accept a job that pays 50k tuition credit/15k salary. You might hold out for a 50k tuition/30k salary.  For the student is might be break even, the university loses money, the government gains money.  Or maybe the package shifts and the student gets 50k of salary but is require to pay tuition (probably from government loans:))

I will say I would much rather they tax undergraduate also just to be consistent.  I like when things affect tons of people. It provides a much bigger incentive to get it right. If ACA was required for all people between 0-65, the problems would have been worked out in a hurry.

Interesting points - here's my 2Ę on the matter of earnings potential and tuition.
From what I see in the science fields, the driving force behind getting a doctorate isn't an increase in earnings potential, but the need to be competitive for any job. The fields have advanced to the point where an undergraduate degree is woefully inadequit, and even a masters leaves you ill prepared relative to the job requirements and the competition.  Future earnings potential may be a strong factor when choosing your undergraduate or even your masters, but by the time people are on the PhD path they are on that path because that's what they want to do, and they realize they can't get a career job without one.
Then there's the issue that the largest source of employment is working either directly for state or federal agencies (e.g. EPA, NOAA, NIH) or depend primarily on funding from state and federal governments for their job (e.g. universities, research institutions). So we have a system where anything that drives up the cost of graduate education could require more input from those same governmental funding sources.
"Do not confuse complexity with superiority"

foobar

  • Pencil Stache
  • ****
  • Posts: 733
Re: Graduate Student Taxes under House GOP Plan
« Reply #47 on: December 14, 2017, 01:08:46 PM »


Interesting points - here's my 2Ę on the matter of earnings potential and tuition.
From what I see in the science fields, the driving force behind getting a doctorate isn't an increase in earnings potential, but the need to be competitive for any job. The fields have advanced to the point where an undergraduate degree is woefully inadequit, and even a masters leaves you ill prepared relative to the job requirements and the competition.  Future earnings potential may be a strong factor when choosing your undergraduate or even your masters, but by the time people are on the PhD path they are on that path because that's what they want to do, and they realize they can't get a career job without one.
Then there's the issue that the largest source of employment is working either directly for state or federal agencies (e.g. EPA, NOAA, NIH) or depend primarily on funding from state and federal governments for their job (e.g. universities, research institutions). So we have a system where anything that drives up the cost of graduate education could require more input from those same governmental funding sources.

There are very few fields were masters plus are required. Seriously look at how many people get BS degrees versus masters and most of them are employed. Now your particular niche of the market might have that requirement but I wouldn't generalize to the whole market.

Either way this was much ado about nothing as it didn't make the final bill.