That’s because STEM grad students are much more likely to get tuition waivers than in the humanities. But yes, it’ll affect many humanities students, too.
There are two ways to raise more money by taxes, raise rates or broaden the tax base. Broadening the tax base also makes collecting taxes easier. Politically it is easier to eliminate a bunch of loopholes at once so lobbyists and citizens do not feel their industry is being singled out.
In order to make income taxes simpler and fairer the trend has been toward treating in kind contributions as income. It used to be that people would receive fringe benefits such as company cars, or country club memberships instead of income as a way to get around the taxes. If a student has a job at the university and makes $30K per year why should they pay more taxes than someone who works for the university and gets $30K worth of tuition waivers? Both are income and there is nor reason to treat them differently.
I see this as more likely than any specific arguably legitimate utilitarian argument. It boggles my mind when I hear people say they prefer Trump’s manner of communicating over Obama’s, as they felt Obama was talking down to them. A considerable amount of Trump’s appeal - birtherism, climate change denial, alternative facts and fake news - appears to be directed towards anti-intellectuals. And such appeals - repeated on Twitter and Fox - have been quite successful for some.
An uninformed or misinformed person’s vote is worth the same as an informed voter’s. What would be funny if the effects weren’t so dire, is that many of the folk who appreciate such appeals lack the critical thinking skills to appreciate that they are being lied to and are not benefitting from the proposed policies. :smack:
When I first heard about this, I thought they were talking about the other kind of tuition waiver, where an employee gets free tuition for themselves or their children. The TA waiver sounds like exactly the opposite, where a student on a scholarship is also given a job on campus. I mean, what is real difference between a “tuition waiver” and a “scholarship”? As far as I can tell, for grad students who are primarily students*, there is none.
- I want to leave out the person employed full-time by a university who is primarily an employee because that seems to me to be a different situation.
Two reasons:
(1) As others have pointed out, tuition waivers are more like scholarships than “fringe benefits” or income.
(2) The average grad student has very little money. How is he/she supposed to afford to pay taxes on $30K worth of tuition waivers? If you can figure out how they can send a percentage of the education they’re receiving to the IRS, I’m listening; but if you’re asking them to send money that they don’t have to the IRS, where are they going to get that money from?
This is the intellectually honest answer.
Not that much intellectual honesty went into the tax proposal.
“Simplification” amounts to making fewer broader classifications of everything. Which means nuance and corner cases are lost. Some of that is loss is attractive to black/white thinkers and even more of it is attractive to non-thinkers.
From a pure and narrow accounting perspective there is no difference between receiving a discount or receiving a subsidy that you then use to pay the full price. Both are value you receive. And if we define income taxes conceptually as “a tax on all the value you receive”, then doctrinally we ought not dig into certain kinds of value being better than other kinds of value. That way lies regulatory complexity and tax arbitrage = gamesmanship by the public.
All this is theory. IMO what really happened is they simply looked around for a way to gore as many D oxes as they could, regardless of their real revenue impact. That the R elite have decided that educated people are the enemy speaks volumes.
The amount of a fee waiver is a semi-arbitrary number that is exactly what the university says it is. It has no tangible value to the student. It can’t even really be said to scale to the value of the school, as a prestigious private university can be expensive, but have less value than a state school where one has an excellent program or advisor.
Ultimately, if this passes (highly doubtful), universities could easily change waivers into scholarships.
Then the students can’t work as teaching/research assistants, because then they’ll be employees and their scholarships will be treated as income.
Many if not most graduate students in non-professional programs (e.g., not MBA, law, medicine) receive at least partial scholarships and often had part time RA or TA jobs. The scholarships are not awarded because of the job, they are awarded to most or all students
Why should a scholarship awarded by a university be treated for tax purposes differently from an outside scholarship particularly one awarded by the company one’s parents work for? That isn’t uncommon at the undergraduate level.
Another, completely different, way to think about it is an employee discount. Is an employee who gets a 10% discount on all purchases taxed on that discount as if it were income? I would doubt it, but I really don’t know.
What about student athletes, who “work” as football players? Are their scholarships treated as income?
I don’t follow. But if it helps, I probably shouldn’t have used the word “scholarship.” I mean the school could just reclassify what the waiver falls under, and call it something else.
No, you’re right, but go back and look at Alley Dweller’s post. The tax code specifically defined what a tuition reimbursement is, and specifically included teaching/research assistants who are graduate students. Now, the proposed revision specifically repeals it.
Let’s stipulate that it makes sense for TA/RA to be an actual employee of the university. Their research belongs to the school, if a TA abuses an undergraduate, the school is liable, they’re eligible for the school’s group health insurance – all sorts of large and small benefits to everyone concerned.
The university could try to define the tuition reimbursement as something else, but that would be sort of like you or me claiming what the IRS calls “ordinary income” as capital gains. It won’t fly because the tax code defines what’s what, and the tax code will now define tuition reimbursement as taxable income.
I’m sure there are a lot of smart university lawyers at work right now trying to figure out how to set up a shell company in the Cayman Islands or something to get around Section 1204. But the bottom line is that the whole thing is stupid, a massive middle finger to both the schools and to the industries who need a steady stream of employees with advanced degrees, and invites being subverted.
I am not a tax lawyer, graduate student, or an employee of a university, but I would strongly suspect that the universities treat the tuition waver as an expense, and likewise, take them off their taxes, similar to how they deduct the salaries of all their employees. If so, then I would view the whole business of offering tuition wavers in lieu of salary as a tax loophole being exploited by Big Education at the expense of the American Taxpayer.
Gotcha, missed that part.
Yes, but they would then offset the expense by the “income” from the tuition. Money might move from one account to another, but it’s still transparent on the student’s end. Typically some portion of the fees are paid by different agents, and this might differ whether they are an RA or a TA. A good portion of your tuition is paid by your advisor’s grant if you are an RA, while the department or college or completely separate division might pay if you’re a TA. I know for a fact that different people paid me depending on when I taught (summer teaching paid more than in-semester), though I don’t know for certain (or cared) who paid the tuition part.
A non-profit university does not pay income taxes or get deductions (except possibly the Unrelated Business Income Tax, but education is probably not an unrelated business for a university).
A for-profit university could not claim a deduction for free tuition unless they had included the unpaid tuition as income in a previous tax year.
If the goods or services are the same as the employer generally sells to non-employees, the employer can give a 20% discount on services and a discount on property equal to the employer’s “gross profit percentage.” This does not apply to real property or investment property.
The IRS released Information Letter 2014-0016 shortly after the students from one university won a ruling from the NLRB saying they were employees.
Universities don’t pay taxes as it is, as nonprofit organizations, so this is irrelevant to them…
This just seems to be going backward. The whole premise of any tax reform used to be “simplify the system”. I.e. it goes in your pocket, it’s money you take home to spend on luxuries like food and medical care - it’s taxable. If it’s something you have no choice about - i.e. property taxes (?) - not taxable. Tax all that income at the same simplified rate.
I’m having trouble seeing this as any simpler. A special case for graduate tuition discounts? What does the plan do, take the tax code from 50 thick volumes to 40?
If I get a 50% discount at the store, I don’t pay sales tax on the list price.
I was under the impression that (at least in STEM) no, or almost no, graduate student actually pays tuition. IE if I was rich and wanted to get a chemistry PhD I couldn’t decide not to do the whole TA/RA thing and just give the department cash.
So what would stop universities from dropping the theoretical tuition to zero (or some small nominal amount). Then if they want to move some of the money from the student’s advisor’s grants, increase some overhead item?