Letter: Georgetown graduate responds to “House tax reform bill”

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Correction: This column had a math error that has been corrected. The standard deduction was previously written as 24k. The standard deduction is 12k in the new bill for individuals. The math has been corrected. 
 
Dear Collegian,
 
The column “The House tax reform bill will make graduate school unattainable,” sketches out other income in reference to the tax bill, and I just wanted to run the numbers’s with everything included, not just the tuition waiver:
 
$27k (tuition waiver) + $13.5k (stipend)  -12k (new standard deduction) = $28.5k taxable income x marginal tax rate of 12% = $3,420 in additional tax liability due to this bill.
 
That does not include tax on income from a part-time job to cover the $5k gap to live. Gifts (eg from family to help pay for school) tend not to be included in gross income, so they’re not taxed. This is certainly a move that hurts us graduate students on the whole. 
 
I do want to mention a contributor to the plight of grad students in the U.S. that may be overlooked in this debate generally, and that is the universities themselves.
 
Perhaps universities ought to consider shouldering more costs for graduate students such as increasing their stipends instead of “providing” more loan assistance. This seems to be the case when grad students teach classes outright. For instance, I took 4 semesters of Latin, all of which were taught by a grad student, not a professor that the university essentially paid nothing to administer, except the opportunity cost of actual professors administering their graduate students–which is part of their job.
 
Tuition’s fair market value is more than the cost to administer classes/the university, and that would seem to be the case for both undergraduate and graduate studies, but likely less strongly for grad classes. Just think of the previous bullet point where I sat in Latin class taught by a grad student, but paid the same rate as if a class was taught by a full professor.
 
I wonder whether recharacterization of the value of the tuition waivers according to the university’s costs to administer would be possible, which would decrease the gross income of grad students taking advantage of waivers. This sleight of hand is something that a number of employers/businesses do to put upward qualitative pressure on the recipient’s perception of the benefit they receive and entice them to buy. Businesses/employers also take account of favorable tax treatment for the other side in ways that often the other side doesn’t, that is, many grad students may not have fully considered their tax liabilities, but universities have, so they may capitalize on an information gap, often by raising prices to offset that gain that the other side does not realize– this is the name of the game for the mortgage home interest deduction: the builders build the tax “savings” the borrowers expect to realize into the cost of the homes they sell. If you’re not considering tax consequences ex ante and in depth before making a decision, then you’ve already lost out– but note that the grad student situation is different because of the standardization of policy, so a university makes a calculation based on grad students generally, not particularly.
 
In short, favorable tax benefits often do not accumulate to the party to whom the benefit was “intended.” Tax benefits that grad students receive often find themselves accumulating in the hands of universities. This is not to say that what this bill does to grad students in and of itself should not be discussed, but this is all to say that there’s another elephant in the room, universities, that ought to be a part of the discussion, but it seems as though universities are more concerned with the bill’s endowment tax and punitive tax on salaries over $1M. In the longer term, it is possible that eliminating subsidies to universities or to students (that accumulate for universities when they raise prices) could help to slow the almost-exponential growth of the price of post-secondary education in the US, but of course, that is not even a glimmer of hope for us who are already grad students. And even so, that hope does not address issues of equity.
 
Christopher R. Ceresa
Georgetown, 2019
 
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