Congress: Do Not Tax Grad Students for Income They Do Not Earn
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We are scientists, researchers, teachers, and graduate students urging Congress to abandon provisions of H.R. 1 – the “Tax Cuts and Jobs Act” – that would tax graduate student tuition reimbursements as earned income. Taxing tuition reimbursement could effectively reduce already meager graduate student incomes by half or more. This change would make graduate school unaffordable for all but the most affluent Americans, and could seriously harm the future of the United States’ leadership in science, technology, and research.
A research career requires years of training that already comes at a significant cost to a young researcher. Most students pursuing a PhD in the United States can expect to spend four to eight years in graduate school. During these years, students are essentially apprenticed to experienced researchers and teachers. This highly specialized training is prerequisite to conducting foundational scientific research. However, extended training forces students to forgo years of higher pay. For those who stay in basic research after graduation, salaries remain substantially lower than similarly educated peers in business, industry, medicine, law, or finance.
The proposed tax plan could double the cost of graduate education overnight. To make a research career financially tenable, universities typically waive tuition for PhD students and provide a modest stipend for living expenses. These stipends – which compensate graduate students for their research and teaching work – are already counted as taxable income. The proposed tax plan would also count tuition reimbursement – with nominal value of between $30,000 and $60,000 – as taxable income. This plan would tax graduate students for invisible money a university pays to itself. Students with earning $20,000/year could end up paying taxes as if they were earning $80,000/year. Because tuition sticker prices are so high relative to student stipends, many students could see their after-tax income fall by as much as half.
We fear that this change will substantially reduce the number of young Americans who pursue a career in science. We love our work, and are proudly devoted to the pursuit of knowledge for the public good. But the simple economic reality is that most of us would not have been able to complete a PhD if the value of our stipends had been halved. If these changes go into effect, those of us who are current students – many of us already burdened by debt from undergraduate and Master’s programs – will not be able to afford to complete our degrees.
Grad students should not be taxed on income we do not actually earn so the wealthiest and most powerful Americans can pay less. What is the purpose of this hefty new tax on education? Is it to finance other important new investments in research? In defense, infrastructure, education, or health? Will it support other reductions that ultimately make the tax code fairer? Will it help reduce public deficits, or strengthen social insurance programs? All evidence points to the contrary. Instead, the proposed tax plan is for the most part an enormous tax cut for large corporations and extremely wealthy individuals. Our economist colleagues tell us there is little evidence that these cuts, largely financed by $1.5 trillion in new public debt, will produce lasting economic benefit for most Americans.
Taxing tuition waivers is not only unfair – it will hurt our economy. The United States’ economic prosperity – accrued through global leadership in tech, energy, pharmaceuticals, engineering, aerospace, agriculture, finance, marketing, and many other fields – is built on our public investment in education and research. Every day, thousands of unsung researchers quietly compile the knowledge base that will support the innovations of tomorrow and the economic prosperity of the next generation. The modest revenue generated by this new tax cannot justify squandering our homegrown pool of academic talent, and jeopardizing the United States’ status as a global leader in innovation and discovery.
This proposed tax on research poses a serious threat to the American science and scientists. We urge you to abandon it.
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