# What is the utility of taxing a university tuition waiver? **URL:** \ **Category:** Factual Questions\ **Created:** [November 14, 2017, 7:29pm UTC](https://boards.straightdope.com/t/what-is-the-utility-of-taxing-a-university-tuition-waiver/801635 "2017-11-14T19:29:50Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![Inner\_Stickler](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/inner_stickler/32/318_2.png) [@Inner\_Stickler](https://boards.straightdope.com/u/Inner_Stickler)\ **Post date:** [November 14, 2017, 7:29pm UTC](https://boards.straightdope.com/t/what-is-the-utility-of-taxing-a-university-tuition-waiver/801635/1 "2017-11-14T19:29:50Z")
There’s been a fair amount of outraged ink spilled over the revelation that the proposed republican tax bill will tax tuition waivers to grad students. Those opposed argue that treating waivers as taxable income severely reduces the students’ take-home income and changes the financial calculus on earning graduate degrees to turn away students who lack the personal wealth to self-fund their studies. Assuming that is true, what benefit do the republicans say will come from making this change? It is hard for me to believe that the added revenue will amount to anything significant from a budget perspective. And it feels odd because income taxes, in my mind, are taxes on money I receive, not money I pay out. I appreciate any clarity on this subject dopers can provide. ---
**Author:** ![SamuelA](https://avatars.discourse-cdn.com/v4/letter/s/c77e96/32.png) [@SamuelA](https://boards.straightdope.com/u/SamuelA)\ **Post date:** [November 14, 2017, 8:28pm UTC](https://boards.straightdope.com/t/what-is-the-utility-of-taxing-a-university-tuition-waiver/801635/2 "2017-11-14T20:28:29Z")
Well, in actual practice the university would either (a) waive only some tuition and make a cash payment to the grad student to cover the tax on that tuition. (done in a way where the payment never reaches the student) (b) waive all tuition and also pay the tax So it’s a tax on universities. Which does still work out to be a tax on grad students, since a university is going to offer fewer grad student positions. Part of the political calculus here is that these grad student slots are pretty much majority foreigners. Publicly funded universities take public money and then use it to offer opportunities to foreign grad students. And not just the cream of the crop, for whatever reason, most university grad student programs are majority foreign students. If tuition isn’t tax deductible for most people, then technically this would be making things more consistent. ---
**Author:** ![thelurkinghorror](https://avatars.discourse-cdn.com/v4/letter/t/7c8e57/32.png) [@thelurkinghorror](https://boards.straightdope.com/u/thelurkinghorror)\ **Post date:** [November 14, 2017, 8:49pm UTC](https://boards.straightdope.com/t/what-is-the-utility-of-taxing-a-university-tuition-waiver/801635/3 "2017-11-14T20:49:32Z")
1. The version of the bill that comes from the HoR has this. [The Senate](https://www.nytimes.com/2017/11/09/us/politics/tax-plan-house-senate-differences.html) version [does not affect waivers](https://www.reddit.com/r/GradSchool/comments/7bwt0j/senate_tax_plan_appears_to_spare_tuition_waivers/). 2. I am having trouble deciphering legalese in the bill, but don’t see any \*specific \*mention to this. It wonder if it’s due to omission, whether intentional or not? None of the articles on it quote a specific part. My Ctrl+F skills may also not be on point; “tuition” is mentioned 10 times but mostly in reference to undergraduate tax credits; waiver is mentioned once and irrelevant. > [@SamuelA](#): > > Part of the political calculus here is that these grad student slots are pretty much majority foreigners. Publicly funded universities take public money and then use it to offer opportunities to foreign grad students. And not just the cream of the crop, for whatever reason, most university grad student programs are majority foreign students. Do you have a link? In engineering, you’re probably right, but in other STEM fields, a **majority** and not a sizeable minority? ---
**Author:** ![Nava](https://avatars.discourse-cdn.com/v4/letter/n/da6949/32.png) [@Nava](https://boards.straightdope.com/u/Nava)\ **Post date:** [November 14, 2017, 8:52pm UTC](https://boards.straightdope.com/t/what-is-the-utility-of-taxing-a-university-tuition-waiver/801635/4 "2017-11-14T20:52:52Z")
> [@Inner\_Stickler](#): > > There’s been a fair amount of outraged ink spilled over the revelation that the proposed republican tax bill will tax tuition waivers to grad students. Those opposed argue that treating waivers as taxable income severely reduces the students’ take-home income and changes the financial calculus on earning graduate degrees to turn away students who lack the personal wealth to self-fund their studies. Assuming that is true, what benefit do the republicans say will come from making this change? In my case, it wouldn’t have reduced the take-home income, it would have multiplied my taxable income by almost three and a half when I was actually only receiving 12K minus withdrawals. Since I was actually living on the 12K stipend, adding 29K to it would have meant having to drop out. Those foreign grad students are often taking jobs Americans don’t want; or at least, the immense majority of those putting themselves through grad school as TAs are. Still using 20yo figures, why would someone who can get paid 30K with a bachelor’s want to spend several years living on 12K? Only those who really wanted to go into academia or research would, whereas for the foreigners it actually makes economic sense. But you see: for someone who thinks that it’s uppity for a foreigner to have a decent job, much less give orders to natural-born citizens (and I’m channeling people like that from several nationalities), giving those uppity foreigners a kick to the ass is perfectly fine. Who is some immigrant with a perfect GRE to think he can do better than a national who barely passed his required coursework? Kicking the intelectual elites plus kicking the foreigners, in their world the only thing that’s missing to make it a perfect kick is having it punt them out of the country. Meanwhile, the Daddy’s Boy whose entrance to a supposedly-elite school was bought by a new building is fine, because he’s “one of our own”. ---
**Author:** ![Nava](https://avatars.discourse-cdn.com/v4/letter/n/da6949/32.png) [@Nava](https://boards.straightdope.com/u/Nava)\ **Post date:** [November 14, 2017, 8:58pm UTC](https://boards.straightdope.com/t/what-is-the-utility-of-taxing-a-university-tuition-waiver/801635/5 "2017-11-14T20:58:56Z")
> [@thelurkinghorror](#): > > Do you have a link? In engineering, you’re probably right, but in other STEM fields, a **majority** and not a sizeable minority? In Chemistry it has been that way for over half a century. ---
**Author:** ![TimeWinder](https://avatars.discourse-cdn.com/v4/letter/t/bcef8e/32.png) [@TimeWinder](https://boards.straightdope.com/u/TimeWinder)\ **Post date:** [November 14, 2017, 9:16pm UTC](https://boards.straightdope.com/t/what-is-the-utility-of-taxing-a-university-tuition-waiver/801635/6 "2017-11-14T21:16:28Z")
While a fair number of the Internet comment sections are of the “bad bad foreigners are getting these breaks” variety, the one I see more commonly is “punish people for getting higher education (well known to be liberally biased).” Of course, Internet comment sections are not an ideal cite for anything other than the basic depravity of humanity. What the actual intent is, it’s hard to say. ---
**Author:** ![TimeWinder](https://avatars.discourse-cdn.com/v4/letter/t/bcef8e/32.png) [@TimeWinder](https://boards.straightdope.com/u/TimeWinder)\ **Post date:** [November 14, 2017, 9:19pm UTC](https://boards.straightdope.com/t/what-is-the-utility-of-taxing-a-university-tuition-waiver/801635/7 "2017-11-14T21:19:21Z")
> [@thelurkinghorror](#): > > Do you have a link? In engineering, you’re probably right, but in other STEM fields, a **majority** and not a sizeable minority? Or for that matter a cite that they’re not the cream of the crop? Grad schools are not, for the most part, trivial to get into–particularly for people from other nations who may not speak English as a first language. There’s an awful lot of hurdles in place that these students have managed to clear to get into the programs in the first place. Foreign students being a majority isn’t proof of that by itself – there’s a lot more foreigners than there are non-foreigners in the world. ---
**Author:** ![Inner\_Stickler](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/inner_stickler/32/318_2.png) [@Inner\_Stickler](https://boards.straightdope.com/u/Inner_Stickler)\ **Post date:** [November 14, 2017, 9:20pm UTC](https://boards.straightdope.com/t/what-is-the-utility-of-taxing-a-university-tuition-waiver/801635/8 "2017-11-14T21:20:17Z")
> [@thelurkinghorror](#): > > 1. I am having trouble deciphering legalese in the bill, but don’t see any \*specific \*mention to this. It wonder if it’s due to omission, whether intentional or not? None of the articles on it quote a specific part. My Ctrl+F skills may also not be on point; “tuition” is mentioned 10 times but mostly in reference to undergraduate tax credits; waiver is mentioned once and irrelevant. Ah, so it’s not so much explicitly increasing the tax on grad students but people taking the general layout of the plan and trying to work out the effect on some specific cases? ---
**Author:** ![jasg](https://avatars.discourse-cdn.com/v4/letter/j/f0a364/32.png) [@jasg](https://boards.straightdope.com/u/jasg)\ **Post date:** [November 14, 2017, 9:24pm UTC](https://boards.straightdope.com/t/what-is-the-utility-of-taxing-a-university-tuition-waiver/801635/9 "2017-11-14T21:24:23Z")
Another tax proposal levies a tax on university [endowments](https://qz.com/1128160/republican-tax-plan-2017-the-gop-is-proposing-a-tax-on-the-endowments-of-elite-universities/). > [@Quartz](#): > > It calls for a 1.4% tax on the investment income of private colleges and universities. But the tax would only affect institutions with at least 500 students and where the value of the school’s endowment is more than $250,000 per student. Bloomberg estimates that the new tax would only affect 70 institutions. The Senate’s version of the plan also includes the provision (on page 162 of 247)… > > Whatever the merits of the tax, it is mostly a waste of time. The financial implications for the government are tiny—it would pay for less than 0.2% of the proposed corporate tax cut—and the size of the tax is too small to make a significant difference on the behavior of affected universities. What the proposal mainly accomplishes for Republicans is to make an enemy of higher education. ---
**Author:** ![Kent\_Clark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/kent_clark/32/105_2.png) [@Kent\_Clark](https://boards.straightdope.com/u/Kent_Clark)\ **Post date:** [November 14, 2017, 9:46pm UTC](https://boards.straightdope.com/t/what-is-the-utility-of-taxing-a-university-tuition-waiver/801635/10 "2017-11-14T21:46:53Z")
> [@Nava](#): > > In my case, it wouldn’t have reduced the take-home income, it would have multiplied my taxable income by almost three and a half when I was actually only receiving 12K minus withdrawals. Since I was actually living on the 12K stipend, adding 29K to it would have meant having to drop out. That’s my son’s situation as well. In his case it will double his gross income, which will double his tax bracket from its current 12% up to 25%. His standard deduction will increase, but nowhere near enough to compensate for the jump in income. BTW, my son is a red, white and blue All American Boy in a STEM program. > [@SamuelIA](#): > > If tuition isn’t tax deductible for most people, then technically this would be making things more consistent. It would be more consistent to count a tuition waiver as a scholarship rather than income. ---
**Author:** ![thelurkinghorror](https://avatars.discourse-cdn.com/v4/letter/t/7c8e57/32.png) [@thelurkinghorror](https://boards.straightdope.com/u/thelurkinghorror)\ **Post date:** [November 14, 2017, 10:01pm UTC](https://boards.straightdope.com/t/what-is-the-utility-of-taxing-a-university-tuition-waiver/801635/11 "2017-11-14T22:01:43Z")
> [@Inner\_Stickler](#): > > Ah, so it’s not so much explicitly increasing the tax on grad students but people taking the general layout of the plan and trying to work out the effect on some specific cases? I don’t know. I didn’t see any evidence that they were specifically targeting tuition waivers, but absence of evidence is not evidence of absence. > [@Nava](#): > > In Chemistry it has been that way for over half a century. [This](https://www.acs.org/content/acs/en/education/students/graduate/survey-of-phd-programs-in-chemistry.html)puts that at 42% ---
**Author:** ![susan](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/susan/32/17537_2.png) [@susan](https://boards.straightdope.com/u/susan)\ **Post date:** [November 14, 2017, 10:03pm UTC](https://boards.straightdope.com/t/what-is-the-utility-of-taxing-a-university-tuition-waiver/801635/12 "2017-11-14T22:03:23Z")
This article might inform part of this discussion (especially Figure 2.8): [What’s wrong with American grad schools, in 3 charts | Fortune](http://fortune.com/2014/09/23/us-graduate-education-problems/) ---
**Author:** ![lazybratsche](https://avatars.discourse-cdn.com/v4/letter/l/ba8739/32.png) [@lazybratsche](https://boards.straightdope.com/u/lazybratsche)\ **Post date:** [November 14, 2017, 11:29pm UTC](https://boards.straightdope.com/t/what-is-the-utility-of-taxing-a-university-tuition-waiver/801635/13 "2017-11-14T23:29:45Z")
I have heard that this particular proposal was aimed at taxing tuition benefits for employees. E.g. my university offers all employees to take three courses per year, or a few thousand towards tuition for courses or professional training outside the university. Three courses per year could cost between $18,000 and $36,000, depending on the number of credits. A quick search tells me that this benefit is currently only taxable above a $5250 threshold. However, the proposed tax changes supposedly ends up being ambiguous about who counts as an “employee”, and what sorts of tuition benefits count as a taxable remission. Like **thelurkinghorror** , I tried to find the exact language in the [bill](https://waysandmeansforms.house.gov/uploadedfiles/bill_text.pdf), but I couldn’t make heads or tails of it. I have a hunch that the relevant change is buried in “SEC. 1204. REPEAL OF OTHER PROVISIONS RELATING TO EDUCATION”, which has a lot of items like “(a) IN GENERAL.—Subchapter B of chapter 1 is amended—(1) in part VII by striking sections 221 and 222 (and by striking the items relating to such sections in the table of sections for such part).” Someone with more time and expertise than me would have to go through every one of those changes and analyze their effect on tuition. For one point of comparison, I did the math for my situation in 2016. With a $29k stipend, $50k tuition remission and filing singly, my federal taxes would go from $2333 to somewhere around $11000. Once I include FICA and state taxes (only on the stipend) that means take-home pay would go from $1980/month down to $1200/month. ---
**Author:** ![thelurkinghorror](https://avatars.discourse-cdn.com/v4/letter/t/7c8e57/32.png) [@thelurkinghorror](https://boards.straightdope.com/u/thelurkinghorror)\ **Post date:** [November 14, 2017, 11:59pm UTC](https://boards.straightdope.com/t/what-is-the-utility-of-taxing-a-university-tuition-waiver/801635/14 "2017-11-14T23:59:05Z")
> [@lazybratsche](#): > > Like **thelurkinghorror** , I tried to find the exact language in the [bill](https://waysandmeansforms.house.gov/uploadedfiles/bill_text.pdf), but I couldn’t make heads or tails of it. I have a hunch that the relevant change is buried in “SEC. 1204. REPEAL OF OTHER PROVISIONS RELATING TO EDUCATION”, which has a lot of items like “(a) IN GENERAL.—Subchapter B of chapter 1 is amended—(1) in part VII by striking sections 221 and 222 (and by striking the items relating to such sections in the table of sections for such part).” Someone with more time and expertise than me would have to go through every one of those changes and analyze their effect on tuition. That’s a good guess as any. In that section, Sec. 1201 and 25A are about American Opportunity Credit (undergraduates only), 1202 is ESAs (any student, but nothing to do with waivers), 1203 is about loans. > [@](#): > > For one point of comparison, I did the math for my situation in 2016. With a $29k stipend, $50k tuition remission and filing singly, my federal taxes would go from $2333 to somewhere around $11000. Once I include FICA and state taxes (only on the stipend) that means take-home pay would go from $1980/month down to $1200/month. I don’t feel like doing the math on my grad school taxes right now, but you paid FICA as a grad student? IIRC Social Security instead went into a 457 plan (much better!) and medicare was exempt. I went from paying 5 separate taxes to 1 when I went to grad school (moved from a state that had income tax and disability insurance to one that had no state tax). IIRC the only time I paid medicare is during June and July, when my regular assistanceship didn’t apply but I usually had other sources of funding through teaching. ---
**Author:** ![am77494](https://avatars.discourse-cdn.com/v4/letter/a/d2c977/32.png) [@am77494](https://boards.straightdope.com/u/am77494)\ **Post date:** [November 15, 2017, 12:10am UTC](https://boards.straightdope.com/t/what-is-the-utility-of-taxing-a-university-tuition-waiver/801635/15 "2017-11-15T00:10:26Z")
I thought international students / scholars from most countries do not pay income taxes under treaties [Tax FAQs | International Student Tax Return and Refund](https://www.internationalstudent.com/tax/faqs/) ---
**Author:** ![Wesley\_Clark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/wesley_clark/32/20581_2.png) [@Wesley\_Clark](https://boards.straightdope.com/u/Wesley_Clark)\ **Post date:** [November 15, 2017, 12:34am UTC](https://boards.straightdope.com/t/what-is-the-utility-of-taxing-a-university-tuition-waiver/801635/16 "2017-11-15T00:34:39Z")
> [@TimeWinder](#): > > While a fair number of the Internet comment sections are of the “bad bad foreigners are getting these breaks” variety, the one I see more commonly is “punish people for getting higher education (well known to be liberally biased).” > > Of course, Internet comment sections are not an ideal cite for anything other than the basic depravity of humanity. What the actual intent is, it’s hard to say. I lean towards that too, it is a way to stick it to their political adversaries. I also think that is why the bills eliminate the state and local tax deduction, and eliminate the mortgage interest deductions. Eliminating those deductions hurt people who live in large cities in blue states where people own expensive homes and pay a lot in state and local taxes. If your goal was to stick it to the liberals in New York City or San Francisco, then altering the tax policy to punish people with graduate degrees, people who pay high state and local taxes and people who live in areas of expensive real estate would do it pretty well. ---
**Author:** ![Alley\_Dweller](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/alley_dweller/32/430_2.png) [@Alley\_Dweller](https://boards.straightdope.com/u/Alley_Dweller)\ **Post date:** [November 15, 2017, 1:32am UTC](https://boards.straightdope.com/t/what-is-the-utility-of-taxing-a-university-tuition-waiver/801635/17 "2017-11-15T01:32:58Z")
> [@thelurkinghorror](#): > > 1. I am having trouble deciphering legalese in the bill, but don’t see any \*specific \*mention to this. It wonder if it’s due to omission, whether intentional or not? None of the articles on it quote a specific part. My Ctrl+F skills may also not be on point; “tuition” is mentioned 10 times but mostly in reference to undergraduate tax credits; waiver is mentioned once and irrelevant. The specific language in the bill is in Sec 1204(a)(3): > [@](#): > > SEC. 1204. REPEAL OF OTHER PROVISIONS RELATING TO > 11 EDUCATION. > 12 (a) IN GENERAL.—Subchapter B of chapter 1 is > 13 amended— > … > (3) by striking subsection (d) of section 117. [The specific language in subsection (d) of section 117](https://www.law.cornell.edu/uscode/text/26/117): > [@](#): > > (d) Qualified tuition reduction > (1) In general > > Gross income shall not include any qualified tuition reduction. > > (2) Qualified tuition reduction > > For purposes of this subsection, the term “qualified tuition reduction” means the amount of any reduction in tuition provided to an employee of an organization described in section 170(b)(1)(A)(ii) for the education (below the graduate level) at such organization (or another organization described in section 170(b)(1)(A)(ii)) of— > (A) such employee, or > (B) any person treated as an employee (or whose use is treated as an employee use) under the rules of section 132(h). > (3) Reduction must not discriminate in favor of highly compensated, etc. > > Paragraph (1) shall apply with respect to any qualified tuition reduction provided with respect to any highly compensated employee only if such reduction is available on substantially the same terms to each member of a group of employees which is defined under a reasonable classification set up by the employer which does not discriminate in favor of highly compensated employees (within the meaning of section 414(q)). For purposes of this paragraph, the term “highly compensated employee” has the meaning given such term by section 414(q). > > [(4) Repealed. Pub. L. 101–140, title II, § 203(a)(1), (2), Nov. 8, 1989, 103 Stat. 830] > (5) Special rules for teaching and research assistants > > In the case of the education of an individual who is a graduate student at an educational organization described in section 170(b)(1)(A)(ii) and who is engaged in teaching or research activities for such organization, paragraph (2) shall be applied as if it did not contain the phrase “(below the graduate level)”. If you are lost reading that, paragraph (1) provides that a qualified tuition reduction is not taxed. Paragraph (2) says it applies only to undergraduate tuition. Paragraph (5) says it also applies to graduate tuition for graduate teaching and research assistants. So, they are striking the whole thing. ---
**Author:** ![Eva\_Luna](https://avatars.discourse-cdn.com/v4/letter/e/e495f1/32.png) [@Eva\_Luna](https://boards.straightdope.com/u/Eva_Luna)\ **Post date:** [November 15, 2017, 2:07am UTC](https://boards.straightdope.com/t/what-is-the-utility-of-taxing-a-university-tuition-waiver/801635/18 "2017-11-15T02:07:39Z")
> [@TimeWinder](#): > > While a fair number of the Internet comment sections are of the “bad bad foreigners are getting these breaks” variety, the one I see more commonly is “punish people for getting higher education (well known to be liberally biased).” And most of the conversation in this thread has been about STEM grad students. I’ve seen no discussion of humanities grad students, most of whom are [not foreigners](https://www.nytimes.com/2017/11/03/education/edlife/american-graduate-student-stem.html?_r=0)and who skew pretty damn liberal IME. (I used to be one.) I see this move as another slam at American intellectualism. ---
**Author:** ![lazybratsche](https://avatars.discourse-cdn.com/v4/letter/l/ba8739/32.png) [@lazybratsche](https://boards.straightdope.com/u/lazybratsche)\ **Post date:** [November 15, 2017, 12:08pm UTC](https://boards.straightdope.com/t/what-is-the-utility-of-taxing-a-university-tuition-waiver/801635/19 "2017-11-15T12:08:54Z")
> [@thelurkinghorror](#): > > I don’t feel like doing the math on my grad school taxes right now, but you paid FICA as a grad student? Yup, though like you it varied. I always paid FICA during the summer, and I also paid it for a few semesters. Might have had something to do with the source of funding for my RAship? Going forward, if the current grad student unionization vote passes, I believe all grad students will pay FICA throughout the year. My wife, at a different university, paid FICA throughout. Practically speaking, I think this is a function of how well the university tax lawyers make their case to the IRS… > [@Alley\_Dweller](#): > > The specific language in the bill is in Sec 1204(a)(3)… > > So, they are striking the whole thing. Thanks for digging that up. My eyes started glazing over part way through looking up the changes in Sec 1204(a)2… Whelp, there goes any argument that the effect on graduate students may not be so bad in some cases. That’s pretty unambiguous: TAs and RAs are hosed. That’s damn near 100% of PhD students, and a sizeable chunk of MA/MS students. ---
**Author:** ![Nava](https://avatars.discourse-cdn.com/v4/letter/n/da6949/32.png) [@Nava](https://boards.straightdope.com/u/Nava)\ **Post date:** [November 15, 2017, 12:25pm UTC](https://boards.straightdope.com/t/what-is-the-utility-of-taxing-a-university-tuition-waiver/801635/20 "2017-11-15T12:25:21Z")
> [@am77494](#): > > I thought international students / scholars from most countries do not pay income taxes under treaties [Tax FAQs | International Student Tax Return and Refund](https://www.internationalstudent.com/tax/faqs/) That certainly wouldn’t be the case for a Spaniard. There is a bilateral treaty by which Spaniards living in the US do their income tax in the US, get a special deductible equivalent to the basic living deductible of Spanish income tax, and file with the Spanish Treasury that “I did my income tax in the US”. But the treatment is no different for students and others, and you only end up paying no income tax if the math says you don’t. Other countries have other treaties; yet others don’t have any specific treaty so their citizens’ income is treated exactly as that of Americans. [Next page](https://boards.straightdope.com/t/what-is-the-utility-of-taxing-a-university-tuition-waiver/801635.md?page=2)