Just to put this into perspective, as a graduate student with 2 kids, this would shift my effective tax rate from 8.4% to 37.0%. As graduate student stipends are already minimal, this would make remaining in my program financially impossible; I assume many other students would be in the same position.
It's also important to note that this would only affect in-demand programs who can afford to pay stipends and provide waivers (engineering, computer science, etc); we're not talking about disincentivizing future history professors (who generally pay their own way with loans), but high-performing engineers working on challenging topics.
This change will absolutely not increase tax revenue; it might incentivize schools to reduce tuition costs (a laudable goal). More likely, it will drive citizens out of graduate programs (where we already make up a single-digit percent), and further promote graduate school as a pathway towards citizenship (as this latter group is extremely price-insensitive).
My sibling is a Grad Student too, their response: Bring on the whiskey and the tax.
Yeah, it is going to hurt grad programs, but no current student is going to have their already pitiful stipend get lessened (think 30k/year in Boston, after 'tuition' takes it's cut), the programs will take the hit for the current students. But the tax is a good thing, as it'll finally reveal the shit that is grad life.
If it goes through, grad programs are about to be a LOT more competitive. Whatever the increase is in tax, that is how many less students get taken in (averaged over all states, things get complicated).
Things at UCLA, MIT, and other big metros are already very tight for grad students, 4 to a 1 bedroom, and barely any $ for needed beer on Friday. It's unlikely the funding will improve at all to begin with, so future students will still be haggard, but there will be less of them.
In talking with them, if the schools don't pick up the costs, it's time to unionize, as they have no other options. Yeah, it'll nuke their careers, get them kicked out, but it's that or quit as it. What do they have to loose?
Under the situation, the student is responsible for taxes on the extra $TUITION_COST. That means that students whose stipend is already only ~$30K in rather expensive areas will owe taxes per year close to that stipend.
Keep in mind also that these degrees typically go on for 6 or 7 years. (The average at my [generally well-regarded] institution is creeping up from 6.5 to 7.)
Taking on $200k of debt to finish a PhD is going to make quite a big difference ten years down the road. (If your school's tuition is $50,000 a year, that's what you're looking at.)
As for me, if this happened and my school didn't make up the difference, I'd finish elsewhere.
I feel very little sympathy for college programs that dont support themselves.
The problem with any tax deduction is that it devotes more capital to it than it would otherwise, and taking it out will always leave some out. Its basic microeconomics.
As far as I can tell, parent's use of "effective tax rate" is correct (the tuition waiver is not income in any meaningful sense -- especially for phd students who aren't even taking courses). So I'm not really sure what your point is?
I'm neither the OP nor do I know about his particular situation, but assuming a fairly generous stipend of $30,000
- Standard deduction is $6,350
- Personal exemption $4,050 x 3 (self + 2 kids) = $12,150
- Taxable income is $11,500
- Of that, it's 10% on the first $9,325 + 15% on the rest (up to $37,950), for a total of $1259. That's about 5%, not including state taxes.
Now, add in $40,000 of "benefits", most of which are not actually beneficial. Taxable income is now $51,500 and the total federal tax is about $8,614, which is a pretty substantial chunk of the 30,000 actual dollars he gets.
To make matters worse, a taxable income of $51,500 would make OP ineligible for some credits/deductions. For example, it's well past the EITC phase-out.
If you ever wonder, "why is the tax code so complicated?" this is the answer.
Every time there is a proposal to eliminate a specific deduction, credit, or loophole, special interest groups crawl out of the woodwork to fight it tooth and nail.
Ok, but it's far simpler elsewhere. In many places (such as Japan), doing your taxes takes a few minutes and you don't need to pay someone hundreds of dollars to someone who has made a career out of the tax system.
you don't need to pay someone hundreds of dollars to someone who has made a career out of the tax system.
You don't. Your employer does [+], because they are responsible for (for the majority of traditionally employed folks) managing your tax returns for you. The prices are, indeed, in the hundreds of dollars per year.
If you do something exotic in Japan, like (to pick an example entirely randomly) sell bingo card creation software over the Internet, you will get intimately familiar with the 青色申告, which is almost exactly as much fun as a US tax return.
My personal tax compliance cost for last year on the Japan side was ~$2.5k; it's cheap at the price because doing a full return given my situation would likely have eaten a solid week.
[+] There are some economies of scale here, but a startup in Japan should budget several hundred dollars for payroll administration, per month, plus another lump-sum due in December for the spike of work caused by the end-of-year adjustment (which is not a tax return per se, but is the closest thing most Japanese people have to a tax return).
There are some irreducibly complex questions in tax, such as the surprisingly difficult "What is income, really?" and the related follow-ups "What type of income is that income given that we've decided we want to treat them differently?" and "When exactly did that income happen, given that we've decided we want to run taxation in an other-than-continuous fashion?" These questions are complicated and nuanced because the economy is complicated and nuanced.
Thanks for the insight. I really like your podcast. (Also, we share a last name! I'm Chris McKenzie. ;-))
What can be done to simplify US taxes isn't a 1 sentence idea ... Unfortunately, having to be cheap on sophistication and explanation is a limitation of the internet discussion format and people's habituated attention spans for it.
Anyway, for a deep dive, I recommend this book by TR Reid who did a longitudinal analysis of tax systems across the OECD, traveling to the countries and interviewing hundreds of people. He gives things a fair play:
> Ok, but it's far simpler elsewhere. In many places (such as Japan), doing your taxes takes a few minutes and you don't need to pay someone hundreds of dollars to someone who has made a career out of the tax system.
The process of filing taxes is separate from how complicated the tax code itself is.
And to be honest, you don't need to pay hundreds of dollars to anyone in order to file taxes in the US. In fact, you can file your taxes using a form that fits on a single sheet of paper.
You may want to opt for one of the other methods of filing, if you qualify for special deductions that might significantly reduce your tax burden, but most people already qualify for the option that takes "a few minutes".
Well the IRS could do your taxes for you and send you a bill/confirmation for you to correct, but companies have lobbied to get an agreement put in place that this will never happen.
> Well the IRS could do your taxes for you and send you a bill/confirmation for you to correct, but companies have lobbied to get an agreement put in place that this will never happen.
The difference between that and filling out a 1040EZ is negligible. It takes as long to write out a 1040EZ as it would to properly verify the information on one that's already filled out for you.
For people who want to utilize the more complex deductions available - there's no way that the IRS could do that for you. Contrary to popular belief, they don't have sufficient information to do that until you give it to them, and quite frankly you wouldn't want them to have access automatically to all of that.
They do that though. The past two years I've filed online with their free forms. I knew that I was taking more allowances and would owe. They said "hey, you actually owe us this". And then I sent them a check.
The problem is, the IRS has no incentive to help minimize your tax. If you really have nothing to deduct, that might not be so bad, but I would have more faith in any of the existing free short-form filing services that already exist.
I had absolutely zero tax obligation in the USA for 9 years, and I still had to file more than a few sheets of paper, taking around a day or so to prepare.
Gifting when dead you aren't taxed until 5m or 10m for married. The GOP tax plan doubles that to 10/20m and then removes it after 6 years.
The estate tax was already a huge benefit when compared to the gift tax. What would be nice is if they could up the amount on the gift tax rate if they aren't going to collect any tax on gifting after death (inheritance). This could free up money that will only be in an estate and not used for years maybe even decades.
When you compare the gift tax when alive to the gift tax after death (the estate tax) it is already a massive benefit.
There is a lifetime $5.49 million exemption from the gift tax. Gifts above $14k are taxed. If you gave me $30k this year, you would not have to pay any taxes on it but your $5.49 million lifetime exemption would be reduced by $16k.
Wow never knew that. I always thought the person receiving the gift had to pay taxes on any amount above the gift tax rate per year if the tax wasn't paid by the giver i.e. 14k currently.
Basically then any money you receive or earn is taxable except loans and gifts up to the gift tax limit, all other money movement is taxed.
Of course winnings are still taxed at normal rates because that is income not gifted per se, I guess I was conflating the two. Example: If you win a car you owe taxes on the whole thing.
So essentially it is the same limit as the estate tax, so I wonder if that also doubles and also goes away in the tax bill.
That will never happen because nearly all of our elected officials use trusts to minimize or eliminate entirely the estate tax they would otherwise pay.
Everyone thinks someone else's loopholes are better places to go looking. Even I succumb to this thinking, at first I was pretty pissed at the retirement saving plan elimination. But all us voters need to grow up and vote in people who have spines and will make us drink our spinach juice. It'd be really nice to have a tax code so simple it puts TurboTax and their ilk out of business.
Why do we - ordinary workers and students - have to drink the “spinach juice”? Why not the people who have amassed utterly unprecedented amounts of wealth and power?
You can eliminate all tax deductions, tax the wealthy, and cut middle class taxes at the same time. All of that requires that everyone in society drink some "spinach juice" though. Of course doing those three things are politically impossible in the current environment, but that's a different problem.
Let me preface this by seeing I'm usually against tax cuts, and every single California tax increase proposition that I've come across I've voted for.
That said, I'd be all in favor of eliminating all these special tax deductions in favor of reducing taxes if it streamlines the federal tax code and prevents tax dodging and cheating. The idea of using taxes as a stick and carrot just leads to abuses (at least the carrot side of things).
Taxes should mainly be used to fund the government, and ensure that things with huge negative externalities (e.g. smoking, environmental pollution, etc) are paid for. Taxes themselves shouldn't be part of a giveaway. If we need to direct funds to a certain part of the economy the government should just do it in a transparent way, such as offering grants to graduate students.
Having had a tuition waver before, there was absolutely nothing to report (no money paid, no money taxed), it most definitely had no impact on tax filing complexity. What they are proposing is to make tuition wavers a “real thing” rather than something that just existed on paper in a university somewhere, that is bound to make life much more complicated. It will also probably completely restructure graduate education in the USA, since many grad students have free take no classes and rather take 9 credits if “independent research”, which basically means they get to work in a lab.
And it is important that grad students be enrolled in classes, even if they're 9 credits of independent research. Student loans, insurance, etc. depends on maintaining student status.
If they also had eliminated the carried interest loophole for hedge fund people and VCs I would actually be on board. I am also a little skeptical of the 25% for pass through entities.
The 25% is going to be abused really bad... There's major problems with the bill, but every special interest (retirement savers, home owners, grad students, R&D corporations, etc) coming out for their pet tax exemption is part of the problem.
In the 80's, Reagan's tax cut deal with Congress was trading reductions in marginal tax rates for elimination of a long set of deductions, predominantly tax shelters. Everyone remembers the former and not the latter :-)
Part of the economic growth after that was surely the shift in investment from tax shelters to much more productive investments.
There are simpler factors to explain the good economic growth 1982-1988: a big drop in inflation (engineered by Fed chair Paul Volcker) and a drop in the price of oil (mainly just luck). There was also a lot of deficit spending. Reforms in the 1981 and 1986 tax bills may have been helpful on the margin, but they're small compared to economic fundamentals.
I wonder if this is the first salvo in a renewed attack on universities from the right. Sentiment toward universities shifted very recently, with a majority of republicans now saying that universities are, on the balance, bad for America.
This is interesting, in part, because universities have been left leaning places for some time, and republicans until recently still saw them as a net positive.
Universities are a net positive, of course - the research at universities is amazingly valuable. UCSF has a negative effect on America? Woah. Do they actually know what goes on in the chemistry, CS, or physics department at Berkeley?
Unfortunately, I believe that there is some merit to the notion that universities are becoming intolerant and actively hostile places toward conservatives and republicans, though I am neither, myself. And that stuff makes for great headlines - I can believe that something has been blown out of proportion on Fox News while agreeing that it is a legitimate concern.
Major universities are basically investment funds that maintain a side business in education for the tax break. Sure, exempt actual research (the PI, the lab, the grad students) and actual education (professors, classroom physical plant) but tax the endowment, the administration, the sports facilities, and so forth.
These are indeed waivers - generally speaking, they're used for three things:
1. To prevent the state from paying the state to educate a graduate student by waiving tuition that would be paid from a stipend, etc.
2. To acknowledge that graduate students must remain enrolled in a program for several years while working on research, but aren't taking classes and probably shouldn't be paying tuition.
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3. To partially adjust graduate students who have no chance of getting in-state tuition (i.e. foreign students) to the in-state rate so that it's possible to recruit grad students.
Any time you hear about some new deduction going away (such as this), ask "Does doubling the standard deduction create a net positive affect for person X?"
Almost always the answer will be yes. We need a simpler tax system. This is coming from someone who will be net-negative from these changes. I can't help but support it.
No, not even close. We're taking about mid four figures decrease in take home pay for people making 30k. It's a double digit tax hike on grad students.
The proposals that have so far come out are not substantially simpler. It's a little redistribution here and there but not nearly dramatic enough to be called a "simpler tax system."
The irony is that all these efforts to make higher edu more affordable actually drive up the price.
Yes higher edu should be accessable. However, that doesn't mean everyone is higher edu material. Again, prices increase along with demand.
Perhaps I missed it but the article doesn't mention the quality of higher edu, just the quantity. Less students means lower revenue, lower alumi fund, etc.
All that said, it's only a matter of time before the higher edu system is (pardon me) disrupted. In ten years time these deductions are likely to be close to meaningless anyway.
These are not about subsidizing higher education. These are entirely about correcting an administrative issue where grad students need to be enrolled in classes, but are not taking up the resources that tuition is supposed to cover.
As Matt has said, essentially what happens when you get out of the coursework portion of your PhD is that you're now working on research. In a lab, at your dining room table, etc.
But it's important for a number of reasons that you remain a student. It allows access to student services, you maintain full enrollment so student loan related repayment things don't trigger yet, you're eligible for student health insurance, etc.
So you need to take whatever a "full load" is, and tuition is billed accordingly.
Except the university knows this is silly. You're not taking classes with instructor time, or in need of a classroom, TAs, etc. So you get a tuition waiver.
Basically, the sum total of this is to allow for an accounting workaround because there's limited ways to express "You're a full time student taking no classes".
Most PhD courses are essentially book-keeping exercises like "Preparing for Qualifying Exams" or "Dissertation Research." These classes, which have no instructor and never actually meet; they exist to maintain the students' "student status" so they can get a degree, remain on health insurance, etc. They're worth much closer to $4/yr than $40k/yr.
That said, I do (slightly) disagree with @Fomite. These high (nominal) tuition rates do subsidize the university because they can be charged to outside funders, but this is very, very different from subsidizing the students directly.
The idea that graduate students are receiving too much largesse at the tax payer expense, though, would be hilarious if it weren't so scary.
I honestly agree with your middle sentence - it can be used to make outside funders cover students (though I'd argue part of this is actually correct, as there's no promise a funded student is in the 'pure research' phase - indeed, none of the three students funded on my current grants are).
This is interesting. Universities with extremely large endowments (Stanford, Harvard, quite a few others) don't really need to charge tuition, even at the undergrad level. And as far as I can cell, most PhD students don't pay tuition.
So, what stops Harvard from setting a zero tuition for graduate PhD students? In many fields, STEM especially, grad students are really valuable for the extremely inexpensive labor they provide, not for tuition checks.
Public universities typically charge lower tuitions, and even then (well, at Berkeley at least), my experience was that it isn't hard to get a tuition waiver and become a TA or RA. So, just do away with graduate tuition for PhD students.
The big casualty, I suppose, would be academic masters students, since those degrees actually are tuition based cash cows for universities, including Stanford. Corporations typically underwrite the tuition, and the students are pretty low maintenance. But I suppose they could create an M.Eng for the corporate students, and an M.S. for the academic students, and charge higher tuition for the corporate program.
Another factor, I suppose, is law, MBA, or Med students who get tuition waivers. Not sure what they'd do about that.
Just a couple of thoughts, but my guess is that the top privates will find a way around this.
Most PhD students don't pay tuition out of pocket, but someone usually pays tuition on their behalf.
For example, my first two years of grad school were covered by an institutional training grant, which paid for my tuition, stipend, and books. The next year was paid for by private fellowship (thanks, Pfizer), which covered pretty much the same things--and a very large coffee mug that I still haven. Subsequent years were paid for by a combination of other training grants to the university and research grants to my advisor.
This adds up to some decent money for the university, especially since PhD students typically take only a handful of classes–and these seminars are fairly cheap to put on.
Now that makes sense - PhD students may be paid out of grants that come from a source other than the university itself or the student. So that would be a source of income lost.
Do you think the grant could go directly to fund research, with the university then funding a grad student with the grant money as a condition of how the grant is used? Or does it have to go through the grad student as a reportable tuition waiver?
I certainly do agree this sounds like a much more complicated problem than a line item that can be hidden when things are internal. Just wondering what loopholes might work.
> And as far as I can cell, most PhD students don't pay tuition.
Yes, they do. But they receive a full waiver, and that waiver is not taxed.
The proposed tax bill amounts to a several thousand dollar / year increase in the tax load on graduate students, who typically make less than 30k/year.
> So, what stops Harvard from setting a zero tuition for graduate PhD students?
We'll see what clever accounting universities come up with, if any.
But indeed: a $Nk pay-cut could end up having a pretty devastating impact on academia.
Right - so my question is, why not just set a PhD student tuition of zero? They don't make any money off this, so why charge it and always waive it? Why not just get rid of it.
That would remove the option to occasionally charge the tuition, but research PhD programs, especially in STEM at elite universities? Tuition from PhD programs must be close to irrelevant.
1. That would mean redefining enrollment. What if a PhD student takes a class that involves instruction time during their research period - as I did, and as some of my students will likely do?
2. The money used to pay the instructors for PhD-level classes, of which there are some, has to come from somewhere. And for many universities, there is $0 that is "irrelevant".
As noted, most PhD students don't pay out of pocket.
What this is meant to correct, as noted elsewhere, is that PhD students still have to be enrolled in classes while working on their dissertation, at least to some extent - and class enrollment means tuition. Full time student status is important for many, many things like health insurance and student loans.
These waivers are an acknowledgement that those classes aren't actually using space, instructor time, etc. so it would be silly to charge them tuition for it.
What's being proposed is essentially charging students for a book keeping adjustment.
Hilariously, I think it will be harder for the top privates. Many states have clauses to prevent tuition being spent using state money so that the state doesn't end up effectively paying itself, which may still work even if waivers themselves go away.
The privates would have to figure out how to define full enrollment but not paying tuition (and for some portion of a PhD students should be paying tuition, via some mechanism). And that can get tricky...
My brilliant proposal is to reduce taxes on productive activities like investments and working, and increase taxes on counter-productive activities like emitting pollution.
So they get a waiver for $40k in tuition, get taxed at 15% for a $6,000 hit. Maybe make $10k in actual money from a job, if they work at all, for a total tax burden of $7500 against a tangible income of $10k. Lovely.
Slice those without money to the bone, and give more to those who have it.
Typical, really. Grad students really get a raw deal already, and rarely receive more than a stipend for the crazy hours they put in trying to further education and the sum total of human knowledge. But let's make life harder on them; shame, shame, shame...
The waivers are meant to acknowledge that while graduate students must technically be enrolled in classes while working on the research portion of their degrees, they are not taking up the resources tuition is supposed to be paying for.
So tuition gets waived, and they don't get taxed on a "gift" that's entirely for handling an administrative process.
Exactly! At least 50% of graduate classes are something like "preparing for qualifying exams" or "dissertation research in progress" and meet zero times a week for zero hours.
The universities also don't pay many of the grad students, particularly in the sciences.
Instead, the students are funded by training grants (to the department or program), and as RAs on grants to individual faculty members. These overwhelmingly come from federal sources, so the net impact on the budget is likely to be zero: these grants would need to increase to cover the taxes, which would then go right back to the feds.
I could get behind funding fewer grad students and using that money to actually do some research instead, but I think asking grad students to absorb a $3,000 pay cut on a $20-30k salary is pretty harsh, especially since many of the "tuition" payments don't cover an actual class.
Is there that much of a difference? If the graduate students need to pay the tax, then new grad students will take that into account when comparing stipends.
Should be for undergrads too then; even student athletes. Right now rich schools like Harvard have legacy students massively subsidized with all the tax waivers. Seeing the sticker shock will drive down obscene professor pay over $100k, make University much more affordable.
> In broad terms, the bill would eliminate or consolidate a number of tax deductions meant to offset the costs of higher education for individuals and companies, including the Lifetime Learning Credit, which provides a tax deduction of up to $2,000 for tuition, a credit for student-loan interest, and a $5,250 corporate deduction for education-assistance plans.
A mandatory gift that is of no material benefit to the student that is generated as an administrative process is not the kind of gift that should be taxed.
This would be like taxing you because I asked you to hold onto a $20 bill for me while I reshuffled my wallet.
It's barter. The students are trading their time for an education. That is a value transfer. There is nothing mandatory about it. Each party is consensually entering into an agreement to transfer services that have non-trivial value. If you could simply escape taxation by bartering, you'd see a lot more bartering. But you don't, because barter is still legally taxable.
No. As noted elsewhere, no education is provided through 90% of these courses. They meet zero times per week and have no real instructor. They are a book keeping exercise so that PhD students are still technically students while working in the lab, not an actual tangible educational course.
This is a just a significant decrease in research funding that is, by default at least, implemented as a substantial tax increase on grad students (those bastards...?), who now pay tax on 40k/year of tuition for literally imaginary courses.
I agree the situation is awkward and stupid, but the material effect is what matters. Without a corresponding increase in science and education funding this is basically an enormous cut to science funding and undergraduate education funding. And it's one that is by default shouldered exclusively by people making 20k / year.
If it has no value, then there is no value to waive. If there is no value to waive, there is no value transfer. Either they should pay taxes on it, or the university should stop 'waiving' tuition and simply make it 'free'. What absolutely should not happen is a special entry in our tax policy for this perverted case.
If it is indeed simply a 'book keeping' exercise, then what it really is is an attempt to subvert some other policy. I'm not sure what that policy might be (student loan terms, perhaps?) But whatever it is, it's that policy that should change. Not tax policy.
> If it is indeed simply a 'book keeping' exercise, then what it really is is an attempt to subvert some other policy. I'm not sure what that policy might be (student loan terms, perhaps?) But whatever it is, it's that policy that should change. Not tax policy.
It's an attempt to recognize the problem of needing students to be fully enrolled to be defined as students often by law.
It's far easier to put in a tax waiver to take care of the consequences of that than it is to change that policy, at a state level, and figure out all the downstream issues of that - which will also probably impact the tax code.
For one thing, so they can be eligible for student services like health care. So student loan repayments don't trigger while they're still in school. Any international student on a student visa. Accurate tracking of which professors go to which graduate students, and the means to record their progress.
No, paying for things directly is how they ought to be paid for. Paying for them through tax cuts is why we have a perverse tax policy. If you want to subsidize something, subsidize it. Or, if it's so important, maybe the universities should be paying for it. They have plenty of money. That being said, I don't mind the government subsidizing research. What I do mind is them subsidizing it through tax policy.
No, what was stealthy was funding it this way in the first place. If you want to fund something, fund it. Don't fund it through tax policy. Tax policy should be about revenue collection, not funding research.
There is no actual income being made. This is imposing a tax on something that no one actually gets! It's an accounting procedure used by Universities so they can meet the requirements of you being a student by law.
I am a PhD student. My tuition of $30,000/year is waived by the University of California since I take no classes and am purely doing research. I need to be a student for various tax purposes for both the University and myself. If the money from my waiver was taxed, I would somehow have to come up with an extra $10,000 out of nowhere! Where do I find that money? My PhD is my job. The government is not funding anything, and I feel you're using that terminology purely to muddy the issue.
To be clear, I don't much care for your argument here. Regardless of your ideological concerns about the ideal way to tax stuff, this policy clearly hurts people who are already in a precarious financial position. It will have remarkably negative effects for students like me. I will simply have to drop out, and all of the domestic PhD students I know in STEM will as well. We can't afford to take out loans for taxes...
This policy has a clear goal. It's impact is what matters. Simply demanding that the tax code be simplified is in this case ludicrous. You're really missing the forest for the trees here - this effectively kills all STEM PhDs in the United States. It's impact would be devastating.
The fact that a policy hurts particular individuals is not a reason not to do it. To argue otherwise is to argue non-seriously. To argue otherwise on your own behalf, doubly-so.
> I need to be a student for various tax purposes for both the University and myself.
That sounds rather...Rube Goldbergian, doesn't it? Why do you think that is? That the university has to charge you a fee, and then waive it? Could it be that they are avoiding some other law, or regulation that is there, and that actually that law is the one that ought to be changed? Does it make sense to simply layer bureaucratic workarounds on top of each other? I'd say no, but some people like spaghetti code, I guess.
> This policy has a clear goal. It's impact is what matters. Simply demanding that the tax code be simplified is in this case ludicrous. You're really missing the forest for the trees here - this effectively kills all STEM PhDs in the United States. It's impact would be devastating.
No it wouldn't. Literally the only thing that would happen is universities would either:
a) Change the absurd "we charge you tuition and then waive it" system.
or
b) Offset the cost delta via a stipend of some kind.
It would not kill STEM, or any other kind of PhD program in the US, and it definitely wouldn't simply be passed on to students. If it did anything, it'd shift the balance more in favor of STEM PhDs and away from other, less remunerative degrees. But I doubt it'd even have that effect at the margin.
And finally, any time the government gives a tax credit, they are funding something. Tax credits are identical to government checks. Understanding this is absolutely essential to thinking about politics. When you donate money to a charity and receive a tax deduction for doing so, the federal government is effectively matching some 30% of your contribution. The reason the government chooses to fund things in this way is that it is more palatable to people. Just as you are doing now, they don't see 'tax credits' as an expenditure. But the truth is that taking money out of revenue collection is the exact same thing as writing a check. And this confusion among the general republic is a prime contributor to government waste and economic inefficiency generally.
EDIT: I should add, to be clear, that I don't think you or any PhD student should actually bear the burden of this tax. I'm saying that the tax policy being the way that it is is a bureaucratic workaround for a problem that is better solved another way, and it ought to be solved in that way, rather than addressed through tax policy.
> But the truth is that taking money out of revenue collection is the exact same thing as writing a check.
Pot, meet kettle. If this is the case, and if it's true that there's lots of "Rube Golderbian" infrastructure at play, why not implemented this policy -- in the short term with a long-term phase out -- as a direct budget cut to the NSF? As opposed to a 20% tax hike on people making 30k? The end effect on the national budget would be the same, without introducing lots a huge budgetary refactoring project.
> a) Change the absurd "we charge you tuition and then waive it" system.
But as a software person (?), you must understand that "ok make this big change to this complex system" isn't always a reasonable request given a 1 year timeframe.
In particular, I'm going to go out on a limb and conjecture that your edit is probably the only thing people actually care about. Everything else is missing the forest for the trees.
> Pot, meet kettle. If this is the case, and if it's true that there's lots of "Rube Golderbian" infrastructure at play, why not implemented this policy -- in the short term with a long-term phase out -- as a direct budget cut to the NSF? As opposed to a 20% tax hike on people making 30k? The end effect on the national budget would be the same, without introducing lots a huge budgetary refactoring project.
Because I don't think we should increase taxes on people making 30k 20%. I think we should eliminate cruft from the tax code. This is cruft.
> But as a software person (?), you must understand that "ok make this big change to this complex system" isn't always a reasonable request given a 1 year timeframe.
> In particular, I'm going to go out on a limb and conjecture that your edit is probably the only thing people actually care about. Everything else is missing the forest for the trees.
Sure, it's certainly possible that making the change immediately is the wrong move. I'm not sure I see the evidence for that in this particular case, but yes, sometimes that is so.
When thinking about tax policy, it's important to consider now how something makes you feel, and not the first-order consequences of the change, but the equilibrium consequences of the change. If you eliminate this loophole would grad students actually pay more? I very much doubt it. The university would find a way to equalize the price, either by modifying the silly tuition policy (a simple fix is make tuition $1 and then waive that), paying it for you, or by some other means.
My guess is that the change will also have no net effect on revenue collection, which makes it fairly worthless from the perspective of its authors, who are trying to justify tax cuts in other areas. But I still think it's a good idea, because anything that eliminates cruft from the tax code is a good idea, provided it doesn't cause undue harm elsewhere, which I think it is highly unlikely to in this case.
"The plan would also tax the tuition waivers that many graduate students receive when they work as teaching assistants or researchers."
This is f-ed up, graduate students don't ever see a red cent from tuition payment from RA and TA grants, which is an accounting manipulation by universities.
While I agree with you on who has the lack of power here, it's unfortunate that government garuntee of loans has let the academic industry grow so out of control. It means that any way of changing this status quo is going to hurt students when it happens, but it's necessary to prevent greater pain down the road. At this point it's a band aid that needs to be ripped off
This has nothing to do with addressing that problem. Literally zero.
It's an obscure bit of accounting for an administrative process, that's being used because many people (like you) will nod sagely about "Academia being out of control" without understanding what the mechanisms actually in place are.
What mechanisms are there then. What is stopping the massive increase in tuition? There is a nearly inelastic demand for higher education now because we as a society have decided you can't have a good life without it, there is no risk on student loans because they cannot be discharged via bankruptcy, the government is subsidizing tuition rates by injecting more money with government loans, and when we start getting to the extreme ends of costs where even the highly inelastic demand is starting to bend we give out more subsidies!
This is helping no one but the academic industry and I say industry because it's the schools and their administrators benefiting, not professors. Students aren't getting a benefit, they are just running in place. As early as 2011 I was working in a call center paying 11/hr that only took employees with bachelor's. It's the new high school degree. Masters are next on the list as institutions decide they need to have "the best" and higher degrees are the only way to prove that. There are less jobs in academia as universities push for more and more adjunct professor who get paid peanuts and have no chance at tenure, and the salary is driven down by the tons of students going through school who can't find a job to pay off their loans in industry and spill over to academia to try and make a living.
Student loan debt is larger than any other debt now and there are zero market mechanisms to make sure the risks of it reflect reality. We need to let the air out of the bubble early and in a sustained manner or eventually there will not be enough resources to keep pretending that sending a bunch of kids to the same building for 4 years to learn zero skills that will help them pay off the massive cost of college, and the whole charade will collapse quickly and with disastrous effects.
I think that everyone should go to college because a higher education leads to better citizens, but we cannot artificially inflate the demand to infinite without constraining the price
You raise some excellent points - many of which need to be addressed. But this doesn't do that. It's the "We must do something, this is something, therefor we must do this thing" fallacy.
The function of these waivers is entirely to offset the fact that graduate students working on their research projects need to be enrolled for a number of reasons, but it doesn't actually make sense for them to pay the same tuition as students who are taking up classroom space, instructor time, supplies, etc. So their tuition is waved.
It's entirely a book-keeping exercise. One that the student largely never sees - except now we're proposing to tax them for it.
The problems are not related to each other save for the fact that they both involve the word "tuition".
As for mechanisms?
The first thing I'd address is state level funding of universities. Many public universities have seen their state support vanish, especially after 2008, and during the recovery, that money didn't come back. At the same time, grant success rates have (at best) remained both low and flat over the past decade or so, making it hard to make up that money on the research end of things.
When you take away state support and federal support, literally the only revenue dial left available is tuition increases.
I'd also be all for a merging of practical and liberal arts education such that you can learn practical, profession-oriented skills but also read Chaucer. We have those universities - they're land grant institutions - but I'd like to see an emphasis in that increased.
We also need to address the pipeline from graduate school to jobs outside academia - in my own lab I treat students intending to pursue careers outside academia the same as I do those who want to continue on, and I'm pretty unapologetic about job prospects. I think it's my moral obligation to do so, but it will put me at a competitive disadvantage to larger labs. Addressing that starts at the Chair/Dean level.
You know what solves none of these? Taking a few thousand dollars from doctoral students for an administrative process.
I would agree that this is possibly and even highly probably not the place to start, but if taking a few thousand dollars from graduate students stops them from going to graduate school right now when they can not afford it, I think that is a good affect. If we believe in the market at all, there are far too many graduate students or they would be commanding a higher price that covered the cost of their "production" for lack of a better word.
Additionally I understand that the funding didn't come back, but tuition is not the only dial. I have seen what seems like every school increase their administrators overhead, continue to fund unprofitable sports programs, and add luxury amenities to their campus to entice students away from other universities. Schools could cut back, but they don't. They have an unlimited trough of money and no reason to ever cut back.
At this point they are acting as corporations and not institutes of higher learning. If they are acting like a corporation then we should treat them like one and stop dumping money into unprofitable ventures. I will point out that we have other industries that are getting money dumped into them that don't need it that should lose the government funding first, like half the industries on this list[1]
There are better fights to be had, but decreasing demand for education that is unprofitable to obtain seems like a good step
It's a good effect in the same way that a startup struggling getting rid of the coffee machine is a good effect - it's technically trimming costs, but in a way that's a drop in the bucket, and doesn't even begin to address the underlying issues.
As for "Schools could cut back, but they don't" that will come as a surprise to my frozen salary, and every department in my university being expected to cut their budget for the next three years.
While still being expected to admit the same if not more students, support the programs to help keep them enrolled, and compete for more grant funding.
Based on what I've read you are a professor, correct? Your salary being frozen isn't what I am talking about. When I went to college we had a 12% raise in tuition one year, and then spent several hundred thousand on a party for the new Dean we got next year. Those are the type of costs I am talking about
Edit: sports teams as well. Our basketball team was bringing in more money than they spent so that's fine for the university. However they also spent millions on our football team who lost money year after year. Why are universities in a position where they can increase tuition by 12% in a single year and then still dump money into a losing sports team for the prestige factor? The universities do not seem to be price concious at all except when it comes to professor compensation
They're extremely price conscious in a number of ways.
Do you have a citation for the several hundred thousand dollar party?
Sports teams are...difficult. I dislike how much money goes to them, but they're a complex thing to value, as both student recruitment and alumni donations are entangled with the athletic program.
My understanding is that it's not really bookkeeping. The tuition is still paid, just by the federal government (or grant provider) to the university instead of by the student. The students can't afford to pay taxes on this, so presumably universities will have to increase stipends to cover the difference. Effectively, the government is increasing taxes on its own grants---which is a (politically) clever, backhand way of cutting research budgets.
I would note that it's also possible to get a tuition waiver from being funded by a non-external source, or from technically an external source that's functionally the same (A CA state agency paying a PhD student at UCSF, for example).
It's also important to note that this would only affect in-demand programs who can afford to pay stipends and provide waivers (engineering, computer science, etc); we're not talking about disincentivizing future history professors (who generally pay their own way with loans), but high-performing engineers working on challenging topics.
This change will absolutely not increase tax revenue; it might incentivize schools to reduce tuition costs (a laudable goal). More likely, it will drive citizens out of graduate programs (where we already make up a single-digit percent), and further promote graduate school as a pathway towards citizenship (as this latter group is extremely price-insensitive).