Against a 61% Tax Increase on Berkeley Students

Currently, when graduate students work as teaching assistants, the university waives their tuition and pays them a stipend. Under current tax law, students pay income tax “only” on their stipend. A provision in the tax bill currently under consideration would count the waived tuition as income, on which the student would have to pay taxes as well.

A calculation by a Berkeley physics graduate student (source) finds that a student who work as TA for both semesters and the summer, is payed at “step 1” of the UC Berkeley salary scale, and is a California resident, currently pays ​$2,229 in federal income tax, which would become ​$3,641​ under the proposed tax plan, a 61% increase. The situation for EECS students is a bit different: they are paid at a higher scale, which puts them in a higher bracket, and they are often on a F1 visa, which means that they pay the much-higher non-resident tuition, so they would be a lot worse off (on the other hand, they usually TA at most one semester per year). The same calculation for MIT students shows a 240% tax increase. A different calculation (sorry, no link available) shows a 144% increase for a Berkeley EECS student on a F! visa.

This is one of the tax increases that go to fund the abolition of the estate tax for estates worth more than $10.9 million, a reduction in corporate tax rates, a reduction in high-income tax rates, and other benefits for multi-millionaires.

There is also a vox explainer, and articles in inside higher ed and the chronicle of higher education with more information.

If you are a US Citizen, and if you think that graduate students should not pay for the estate tax of eight-figure estates, you should let you representative know. Usually calling, and asking to speak with the staffer responsible for tax policy, is much better than emailing or sending a physical mail. You can find the phone numbers of your representatives here.

If you have any pull in ACM, this is the kind of matter on which they might want to make a factual statement about the consequences for US computer science education, as they did at the time of the travel ban.

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7 thoughts on “Against a 61% Tax Increase on Berkeley Students

  1. Even from the monetary standpoint, I am not sure how this tax increase makes sense — (a) there are about 80000 grad students and even if everyone were to pay say $3000 more, this about $240 milllion, hardly a big windfall; (b) paying a couple of thousand more in taxes during PhD can be a dealbreaker (well, at least for me — it’s the difference between having no savings and being in debt). On the other hand, with a PhD , you are almost guaranteed that 5–7 years down the line, these people will have reasonable incomes which will more than make up for the “lost taxes”. Unless I am missing something, this looks nothing other than being retributive.

  2. This would make it untenable to be a graduate student, if everything else stays fixed.

    But from an outside perspective, the current rules look like a money laundering scheme. Universities use an accounting gimmick of setting an arbitrary dollar amount for PhD student tuition, and then waive it. At least in STEM fields, essentially no PhD student actually pays tuition. Why not just set tuition to 0? The reason is because “tuition” can be charged to funding agencies, and so this accounting trick of setting and then waiving tuition allows universities to extract more overhead from the NSF, NIH, etc.

    Of course, this accounting trick represents a non-trivial fraction of government support for academic research. It seems natural to simplify the tax code by disallowing this trick, but unless the goal is to de-fund academia (maybe it is), it should be countered with an increase in direct funding to universities from funding bodies.

  3. Pingback: 117(d): Please don’t tax PhD tuition waivers | Power Overwhelming

  4. Pingback: The GOP Tax plan and universities | Windows On Theory

  5. To answer the comment of the serious man above, I appreciate the logic of it, but I think that looking at tax proposals from the point of view of simplicity, elegance, or even logic is misleading.

    Given the status quo, any change to tax policy will be advantageous to some and disadvantageous to others. In the parlance of the current administration, there will be winners and losers.

    Given the current state of our economy, and our society, and where we are going in the foreseeable future, does it really make sense that research universities and graduate students have to be the losers? And that those standing to inherit more than $11 million have to be the winners? If your answer is no (you generic reader, not you Larry Gopnik), then let your elected representatives know.

  6. Pingback: Shtetl-Optimized » Blog Archive » The destruction of graduate education in the United States

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