Tax Change Impact - Tuition Waivers Taxed!

[Sigaba]

A question that's a bit easier for me to ask since this specific proposed change will not impact my taxes.

Should the focus be on the politics of the proposed changes or the math of how this specific change impacts some graduate students directly?

IMO, the best form of the argument isn't how much more in taxes you're going to pay to the dollar, the best form of the argument centers around an affirmative case for

• tax payers to subsidize the advanced education of (mostly) young grad students, and
• middle class tax payers not shouldering the burden that will result from decreased taxes for the richest Americans. <== Without using the phrase "fair share" because it absolutely does not resonate among Republicans, who are needed to contact their representatives.

My $0.02.

[mibshubby]

TakeruK, your numbers are different from what I got using the supplied calculator listed above.

For 25k, taxes would be $2331 or 9.3% for current tax and using proposed tax the 40k would be 3,336 or 8.3%.  I placed zeros in all other sections of the calculator.  This is about a 30% increase but it only $1005 or $83.75 per month which is still a lot under the $650 claimed earlier in this thread.

By the way, 49k for tuition is very high.  I had looked at a variety of places and the numbers are all over the place for tuition.  Cornell's tuition varies between $20-30k while in state at the University of Kansas is only $7341.  This makes me agree that the value of the education is not fully reflected on the tuition because, while Cornell might have a better program is it really 4 times better?

Regardless of how much extra students will have to pay because of this the universities will need to do something.  They have to place a value on it or else they would let people in for free but if there is a value then it has to be taxed when they waive it for grad students.  So they need to increase the stipend to cover the taxes for tuition or come up with some other way of covering it.  Of course, how much are the taxes going to be can very depending on personal situations (single, size of stipend, other income, etc.)

[muskratsam]

Sigaba, I think specific stories are what get politicians to take action.  If you contact your representative and tell them your tax bill will go from (just for example) $2,500 to over $10,000 due to this change, that is more compelling than the general argument about the policies.  By all means if your specific taxes aren't impacted but you want to make the general argument, still contact your reps and senators.  But if they can pin a specific egregious dollar value to the plan for one person or family, that is sometimes more helpful.

 Mibshubby, I doubt universities will take any immediate action for TAs and RAs who already have contracts through this current school year.  So the first six months of next year at least will have no relief.  Even if they do something next year (say, increase stipends a bit), it would happen next fall at the earliest, and I'm sure wouldn't be retroactive for the increased taxes due to the winter/spring semester tuition we are about to have waived starting in January.

[muskratsam]

The Senate released their version of the tax bill today.  So far the only change related to education I've heard about is that they are making student loan interest deductible again (it isn't in the House Bill).  I'm hoping some change for this is buried in the details and just hasn't been uncovered yet, but am not optimistic.  

[TakeruK]

32 minutes ago, mibshubby said:

TakeruK, your numbers are different from what I got using the supplied calculator listed above.

For 25k, taxes would be $2331 or 9.3% for current tax and using proposed tax the 40k would be 3,336 or 8.3%.  I placed zeros in all other sections of the calculator.  This is about a 30% increase but it only $1005 or $83.75 per month which is still a lot under the $650 claimed earlier in this thread.

(emphasis added). The bolded part is potentially your error. You should enter "1" in the "Number of personal exemptions" if you are a single taxpayer that does not have dependents and are also not being claimed as a dependent by someone else. If you are calculating tax owed while being claimed by someone else as a dependent, then yes your numbers are right. But I was calculating the tax scenario for the simple single taxpayer case where you are entitled to the personal exemption. This is where our math differs, when I use the calculator with 1 personal exemption, I get the same number as the "manual way" I wrote about.

35 minutes ago, mibshubby said:

By the way, 49k for tuition is very high.  I had looked at a variety of places and the numbers are all over the place for tuition.  Cornell's tuition varies between $20-30k while in state at the University of Kansas is only $7341.  This makes me agree that the value of the education is not fully reflected on the tuition because, while Cornell might have a better program is it really 4 times better?

Regardless of how much extra students will have to pay because of this the universities will need to do something.  They have to place a value on it or else they would let people in for free but if there is a value then it has to be taxed when they waive it for grad students.  So they need to increase the stipend to cover the taxes for tuition or come up with some other way of covering it.  Of course, how much are the taxes going to be can very depending on personal situations (single, size of stipend, other income, etc.)

Agreed. That's exactly why I said what I did after the math. The tuition "sticker price" at my school and many others are not realistic for grad students. It increased from $39k to $49k over 6 years. There are schools with tuitions of $60k+. If I get to set the rules, I would follow the example of how the IRS treats compensation for e.g. apartment building managers who get free rent. Set a fixed number for the "value" of free rent and tax on that instead.

[TakeruK]

42 minutes ago, Sigaba said:

A question that's a bit easier for me to ask since this specific proposed change will not impact my taxes.

Should the focus be on the politics of the proposed changes or the math of how this specific change impacts some graduate students directly?

IMO, the best form of the argument isn't how much more in taxes you're going to pay to the dollar, the best form of the argument centers around an affirmative case for

• tax payers to subsidize the advanced education of (mostly) young grad students, and
• middle class tax payers not shouldering the burden that will result from decreased taxes for the richest Americans. <== Without using the phrase "fair share" because it absolutely does not resonate among Republicans, who are needed to contact their representatives.

My $0.02.

I definitely agree with you that if you want to change a voter's mind or if you were a lawmaker trying to convince another lawmaker of the folly of this proposed law, your approach is the right way to do it. But when you want to appeal to your representative, personal stories that show how these changes will hurt their constituents will work a lot better, from what I have learned.

[muskratsam]

A personal story is a lot likely to get mentioned in a hearing or picked up by a news outlet and publicized.  

[mibshubby]

I see the senate just proposed a new tax bill.  Not sure of the details yet.

[Sigaba]

14 minutes ago, muskratsam said:

A personal story is a lot likely to get mentioned in a hearing or picked up by a news outlet and publicized.  

Is your specific story as a graduate student going to change the mind of a Republican lawmaker who represents constituents who want to humiliate you?

[muskratsam]

They do listen to their constituents, and count the number of calls that come in on any side of an issue.  How can it hurt?  There are a few moderates that might be influenced.  And more liberal reps may use your story to get bad publicity for this part of the bill.  It is worth the call.  If no one calls, it SURELY won't change.  Remember that recent non-tax bills pushed by this group have collapsed under public pressure.   Heat from us and our friends/families could make a difference.

[TakeruK]

3 minutes ago, Sigaba said:

Is your specific story as a graduate student going to change the mind of a Republican lawmaker who represents constituents who want to humiliate you?

The point is to appeal to your own representative. A personal story to someone who doesn't represent you would not work. The point is to talk to your own rep as one of their constituents and have your friends and supporters who are constituents to call in and tell them how their friends, family, colleagues etc. are affected. Often, you don't even need to tell a compelling story because sometimes you just want to be counted in the tally of people who "called to say they are against X".

That said, I'm not trying to say that you should not also do what you said above. There are many ways to influence lawmakers. I think it's incorrect to believe that we can only influence lawmakers if we make detailed arguments the way you described. This level of time and effort may discourage people from voicing their opinion which will not do any good. Also, you might end up telling the whole detailed argument to a staffer that isn't really listening or isn't going to be able to repeat it to the actual representative.

For those with time, ability and energy to write up and present strong arguments against this bill, they should do so. We need people to do that otherwise it's not going to make a difference. But for those without as much time, ability and energy, something lower effort can also be effective. Calling in every single day with the same message helps add your tally mark to the list. A short script like, "Hello, my name is X and I am one of your constituents living in zip code 12345. I am calling to oppose the Tax Cut and Jobs Act because it removes much needed tax deduction for tuition waivers. With this change, my tax owing will go from X dollars to Y dollars. My stipend is Z dollars so I will no longer be able to afford to continue my research career working on ABC."

Definitely personalize as much as you want. You can also choose to highlight the unfairness of a change that affects students who made decisions on careers long before this act was announced. Or that the tuition sticker price doesn't actually reflect the value. You can pick 5 different things to highlight and say a different one each day of the work week!

Also, even if you are not an American citizen, foreign people living in the US are still constituents. Be sure to not say anything that implies that you are a voting citizen. As non-citizens, we cannot donate money or time/volunteer for specific campaigns for office, but we can still donate money/time to specific causes (e.g. "Students against the TCJA") and of course, we can influence how our friends and family in the US vote for their representatives. Therefore, if you feel like doing it, non citizens can also call up senators and representatives!

[Sigaba]

7 minutes ago, TakeruK said:

The point is to appeal to your own representative.

I respectfully disagree. The point of political activity is to get something done or to stop something from being done.

A personal appeal to a representative is a tactic that may or may not sway the broader discussion or get a decision maker to change one's mind.

• If you center your personal appeals around your status as a graduate student, and your representative and most of his constituents despise academics, what then?
• If you center your personal appeals around detailed calculations on how the change impacts your bottom line, and your numbers are off, and/or someone counters that as a student you have access to resources and amenities that are publicly funded, what then?
• If you successfully focus your effort on stopping the initiative to tax tuition waivers have you really won if lawmakers say "okay," and then propose changes to the tax code that impacts your students or your neighbors or your friends? What then? Do you call it a day or do you start again from square one?

As a Republican, I am familiar with the MAGA "drain the swamp" Trump supporters. They are using the general Republican opposition to "big government"  as cover for an anti-intellectual vendetta against everyone in the Ivory Tower. It isn't an accident that this measure is on the table. The anger/anguish of those you who are justifiably concerned by the proposed changes is frosting on a cake layered with misogyny, nativism, misogyny, racism, misogyny, religious intolerance, and misogyny.

As someone who writes technical documents for participants in contentious public policy debates, I can point to instances where a NIMBYist approach relying on personal appeals to representatives has carried the day. I can also point to instances where those victories were Pyrrhic. Sometimes individuals get so invested in opposition to X that they overlook the fact that without X, achieving Y becomes more costly and time consuming. I can also point out that in many cases, that NIMBYism is hard to sustain unless the dissenting voices have considerable standing in their communities.

What I am recommending is that individuals choose tactics that serve a strategy aimed at securing an objective (or objectives) that go beyond an individual's immediate concerns and ultimately still address them. I am recommending that individuals find ways to share their experiences that resonate on a one to one basis and information on the long term impact of the changes on a local and national level. "Back of the napkin" examples follow.

• I'm a graduate student in STEM. Yes, the change will hurt me in the here and now, and I can handle it. My bigger concern is the impact it will have on our community's ability to develop innovative technologies that can help the economy to grow locally and nationally. You may not be aware of contributions we're making so here they are...
• I'm a graduate student in the social sciences. Yes, the change will hurt me in the here and now, and I can handle it. My bigger concern that our community, like America, has a number of issues that the government cannot solve on its own. I would like to bring to your attention how my work is improving the understanding of these issues and potential solutions.  Some of these solutions can be implemented locally, others through private-public partnerships on a state or national level. All of these solutions will empower residents of our immediate community..
• I'm a graduate student in the humanities. Yes,  the change will hurt me badly in the here and now. I will do my best to handle it. My bigger concern is that the centuries' old argument over the optimal nature of American civilization is tearing the country apart. If we don't change the way we talk to each other,  we will compromise our ability to address the issues of the day and challenges, know and unknown, that we'll soon face. As researchers and educators, the work we do is materially contributing to the restoration of civility in American every day life. Here's how...

My $0.02.

[TakeruK]

40 minutes ago, Sigaba said:

I respectfully disagree. The point of political activity is to get something done or to stop something from being done.

A personal appeal to a representative is a tactic that may or may not sway the broader discussion or get a decision maker to change one's mind.

• If you center your personal appeals around your status as a graduate student, and your representative and most of his constituents despise academics, what then?
• If you center your personal appeals around detailed calculations on how the change impacts your bottom line, and your numbers are off, and/or someone counters that as a student you have access to resources and amenities that are publicly funded, what then?
• If you successfully focus your effort on stopping the initiative to tax tuition waivers have you really won if lawmakers say "okay," and then propose changes to the tax code that impacts your students or your neighbors or your friends? What then? Do you call it a day or do you start again from square one?

I think you are right on all of these points. My point was that if one was going to choose between doing nothing vs. appeal to their rep, I think it's better to appeal to the rep. If one can do all of the above then that's even better.

42 minutes ago, Sigaba said:

 

• I'm a graduate student in STEM. Yes, the change will hurt me in the here and now, and I can handle it. My bigger concern is the impact it will have on our community's ability to develop innovative technologies that can help the economy to grow locally and nationally. You may not be aware of contributions we're making so here they are...

 

If I were still a student in the US, this wouldn't be a true statement. I actually would not be able to handle paying $14,000 per year in taxes out of a $33,000 stipend in a place where a single bedroom place costs $1600/month (just for reference, virtually no grad students at my school could afford a one bedroom place on their own). If this change became law, I would have left my degree program.

As such, I think the students who are going to be most affected aren't going to have time or energy to fight this change. It's up to those who can weather the damage to do what you're suggesting. So I think your scripts are spot on, because the people who are going to have the ability to fight the way you suggest are the ones who can handle it.

Again, my suggestions were not that people do it instead of your way. They can be complementary. And even if your rep is a Republican that despises academics, at least the time you're taking up is blocking those calling in to support the bill. Maybe I am just naive but I do think having large numbers of people calling in to say how they will be hurt will at least make the rep think about what they are doing. And if not the rep, then maybe the staffers that have to listen to it every day.

[muskratsam]

The main thing is to generate calls and complaints about this, regardless of which approach you want to take.  I am seeing a few more articles.  It was mentioned on Marketplace on NPR today, and there is an article on the Forbes website.  It came up on the Wall Street Journal opinion page, but buried in an article that was headlined and started out critical of higher education, so that probably wasn't helpful.

Frankly, you may be right about many Republican representatives not being influenced by this.  Their almost gleeful dismissal of higher education and scientific facts doesn't bode well for this.  But I think there are a few people who might be influenced.  Senators like Jeff Flake, Ben Sasse, Bob Corker, John McCain, LIsa Murkowski, or Susan Collins might be influenced if you or your families are in their states.  The Senate does tend to be a little more sane than the house, and any bill has to go through them.  

 

[TakeruK]

The American Astronomical Society has a fellow for science policy. Here is a recent relevant article addressing what AAS members (but really, anyone) can do to oppose the tax bill: https://aas.org/posts/blog/2017/11/aas-policy-alert-tax-reform-consequences-higher-education

 

[muskratsam]

I've been in touch with a reporter for the New York Times.  She says are doing a story specifically on this and to "stay tuned".  Once they publicize it, more news networks will pick it up and run with it.  

[muskratsam]

I heard a rumor that the Senate version of the bill keeps the grad school tuition tax break.  Have been digging around trying to find details, and an article in the Philly Inquirer says:  

Graduate students. Many PhD students were concerned about the House bill’s provision to count tuition waivers from their universities as taxable income, a move that would raise many graduate students’ tax bill by thousands of dollars. But the Senate plan keeps the tax breaks in place for graduate students.

So that is a good sign, although I haven't seen anyone publish the actual language.  And this could still be lose in the reconciliation process.  Don't let up -- keep calling and pressuring for this! 

 

[fuzzylogician]

Looks like good news for stipends but still bad news for the endowments, which will probably also mean fewer financial aid packages, or lower ones. 

https://www.washingtonpost.com/news/grade-point/wp/2017/11/10/endowment-tax-remains-in-play-but-graduate-stipend-tax-is-off-the-table-in-senate-plan/?utm_term=.28499b8d2733

[dr. t]

I think fewer financial aid packages are a bad thing, but to be fair it's kind of bullshit that endowments are tax free. 

[TakeruK]

55 minutes ago, telkanuru said:

I think fewer financial aid packages are a bad thing, but to be fair it's kind of bullshit that endowments are tax free. 

I'm not sure how I feel. I like consistency and fair taxation. But I also believe in governmental policies that incentivizes actions for the good of the people through tax benefits (or other means). So I think there can be a balance but I'm not certain where it should be. Right now, I think "legitimate" schools should not be taxed on their endowments but I am not sure how to best define that. What I mean is to include public schools and "legitimate" private schools but exclude predatory degree mills to get this benefit. But how to define and enforce that might be tricky. Although I think that at the very very least, public schools funded on tax dollars should not be taxed on their non-public income (since that non-public income offsets how much tax dollars needs to be funneled into the school so taxing it seems counter-productive, to me).

[muskratsam]

The House is voting tomorrow -- please make one last push on this issue today with your representative.  Regardless of party... anything can happen in terms of votes on this, and if they end up eventually (somehow) negotiating for Dem votes on this, you still want your rep to know that this is a huge problem for us.  

www.govtrack.us is a great place to figure out who your rep is, especially if your state's Secretary of State's office has a website that is hard to navigate.  (And if you haven't, be sure you are registered to vote -- if this goes through, then flipping the house and senate next year might be our best way to reverse this).  If you need extra documentation to register in your state (like a birth certificate), that can take a while to get, so starting that process now would be good.  If you move, put changing your registration on the top of your list of items to do.

 

[catsareme]

This just passed in the House.

[muskratsam]

Yes, just passed the House.  We need to keep pressure on our Senators.  

I'm wondering if anyone is hearing any discussion of this from their department heads, university grad school, or unions if you have one at your school. 

Edited November 16, 2017 by muskratsam

[TakeruK]

1 hour ago, muskratsam said:

Yes, just passed the House.  We need to keep pressure on our Senators.  

I'm wondering if anyone is hearing any discussion of this from their department heads, university grad school, or unions if you have one at your school. 

My PhD school grad student government had a lot of discussion on this. I was involved in it a lot until I graduated. My friends who are still there said it was on the agenda for every meeting of the relevant bodies (e.g. Deans, etc.) So at least at that school, there were tons of University-level administrator discussions on it. As I wrote in the math above, our taxable stipends will be $80k if tuition waivers are taxed and almost half of the student body (international students) will be hit with an extra $3000 in taxes (almost 10% of our stipend).

In addition, while I was there, we advocated strongly for better financial support for graduate student parents. Part of the resources put together to help student-parents with the cost of child-care involves taking advantage of the Dependent Care Spending Account (i.e. $5000 of pre-tax income to be used for dependent childcare). This isn't available to non-resident alien taxpayers, unfortunately, but it's something. However, at least in the original draft of the bill, this benefit is also getting axed. So lots of very negative changes that are particularly relevant to my old school and student government.

But this was all as of last week....I'm not in the US anymore so I don't get all the updates from my school. Hope it's going well. I could potentially be impacted since I received tuition waiver for the first half of 2017 (graduated in June). Heard that it might not take effect until 2018 tax year though, which would save me. But if I will owe a ton of taxes shortly, at least only having half of year of tuition waiver plus a "real" salary as a postdoc now will mitigate the impact (although the currency difference will suck).

[muskratsam]

I am seeing a lot more news stories on this in the national news, it is starting to get some traction for how ridiculous it is.  Keep pressure on your senators, call daily.  Try to get your classmates to call, too.  We are relying on the Senate now to block this, since the House passed it already.