Sunday, November 5, 2017

The New Grad School Tax

The latest revelation from the latest GOP tax plan is that it would tax tuition waivers for graduate students. For someone who has two post-graduate degrees, and who benefited greatly from tuition waivers covering the cost of my education, I can say that this is a blow to graduate students everywhere. In essence what this change to the tax code means is that the tuition waiver that students receive, will be taxed as income, despite the fact that money never changes hands between the student and the institution. When I had my tuition waived I never even received a statement telling me what I owed (one semester there was a bit of a mistake with the Student Finance Office, and I did get to see what Clark charges for tuition, but more on that later).

In order to give some sense of what this change to the tax code would mean to a graduate student, I am going to give a brief breakdown of what my tax situation looked like while I was a Teaching Assistant and Graduate Student at Clark University (where I earned my Ph.D.). Since at the time I did not have to pay any tuition to Clark University, outside of a $100 'Activities Fee' every year, I left graduate school essentially debt free. This has been a major boon for me in my job search as I have been able to forestall getting a full time position and exist in the part time world of adjuncting, because I do not have loans to pay back. That said, even though I came through debt free, I did not rake in the money while a graduate student, as at most I had about $2,000 in my bank account at the end of the six years of work at Clark.

Compare that modest gain with the following math. For the six years I was at Clark -- and I graduated ahead of schedule in my field -- my tuition was meant to be around $42,000 per year. On top of that, for four of those years, Clark paid me to take on the role of Teaching Assistant in the Department of History for about $10,000/year. So, for four out of the six years, under this tax plan, I would have "earned" $52,000, and for the remaining two my "earnings" would be $42,000. We will be calculating the tax rate based upon the Republican tax plan as it is proposed, and can be found here. Thus, for the years I earned $52,000 as a single filer, I would be taxed at the 25% rate, meaning I would owe: $13,000 before any applicable deductions. For the other two years, where I only "earned" $42,000 my tax liability would be: $5,040. All told, for all six years of my graduate studies I would owe the federal government $62,080. Remember: at the end of grad school, without this sort of onerous burden, I was only able to save about $2,000, under this plan I would owe approximately thirty times that amount.

This sort of tax burden would have undoubtedly have forced me to take on loans, and likely would have made me reconsider going to graduate school, which is likely the point of this tax plan in the first place. Trump's constituents tend not to be those with graduate degrees, and the Republican Party seem entirely fine with the idea of restricting education as much as possible. The problem with this plan is that it is going to further skew the nature of education in America, and will absolutely lead to many young, ambitious, graduate school considering students to travel overseas for their education, where they will not be saddled with the tax burden of high tuition -- as most non-American universities charge a pittance compared to the American educational system. The knock on effect of such a migration of intelligent young people will surely be that it is more difficult for American businesses to attract workers who have moved countries, many of whom will start a life of their own in their newly adopted lands. Because of this, it is possible that the United States will find itself lagging behind in research intensive fields, which could potentially be a major issue for the American military-industrial complex, as well as America's standing in the world as a whole.

This plan is a misguided, and short-sighted attempt at grabbing as many dollars as possible to try and make sure that the budget conforms to the Byrd rule, and another attempt by the GOP to kick the ladder out from under the next generation, as it tries to climb out of the economic rubble that the Baby Boomers have left in their wake.

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