Citing potential harm to the United States’ technological competitiveness and global science and industry status, 31 Republican members of Congress urged House and Senate leaders in a Dec. 7 letter to oppose repealing a tax provision which keeps graduate tuition waivers tax-free when crafting the final version of the Tax Cuts and Jobs Act.
Repeal of the provision, which was included in the U.S. House of Representatives’ Nov. 16-approved version of the new Republican tax bill, would turn the tuition waivers that many U.S. universities provide to students who conduct research or teach courses into taxable income. Under current law, these waivers aren’t taxable.
Specifically, repealing the income exclusion for graduate tuition waivers would remove a protection for graduate students that allows them to avoid paying a substantial tax, wrote the U.S. lawmakers, who included Republican Representatives Susan Brooks of Indiana; Dr. Michael C. Burgess, Lamar Smith and Bill Flores of Texas; Tom Cole of Oklahoma; Rodney Davis and Randy Hultgren of Illinois; John Katko of New York; Steve Stivers of Ohio; Evan Jenkins of West Virginia; and Glenn “GT” Thompson of Pennsylvania.
For example, including such a tax on a graduate teaching assistant earning a $34,240 median wage would tag an additional $12,000 to $50,000 onto that person’s taxable income, according to the U.S. Bureau of Labor Statistics.
The result would saddle graduate students with “a major tax increase at a time in their lives when they likely lack the ability to pay,” according to the lawmakers’ letter, which was sent to Senate Majority Leader Mitch McConnell (R-KY); Speaker of the House Paul Ryan (R-WI); Sen. Orrin Hatch (R-UT), chairman of the Senate Finance Committee; and Rep. Kevin Brady (R-TX), chairman of the House Ways and Means Committee.
At the same time, 57 percent of 2011-2012 graduate-tuition waiver recipients were pursuing degrees in science, technology, engineering and math, according to the letter.
“These potential graduate students are our country’s future medical researchers who discover life-saving cures; engineers that develop cost-saving methods production; and software programmers that code the next market-transforming mobile app,” the letter said.
Tax policy should make America more competitive, not create barriers to technological progress, the members of Congress wrote.
In fact, they wrote, one goal of national tax reform has always been to stimulate economic development and create jobs, and a well-educated workforce is essential to achieving that goal.
“A policy that increases students’ costs would discourage our nation’s brightest minds from developing greater expertise in their area of study and engaging in leading-edge research,” the lawmakers wrote.
And as the U.S. economy transforms, businesses across the country are increasingly seeking to hire professionals with specialized graduate education, according to the lawmakers, who cited Amazon as an example. The Seattle-based e-commerce and cloud computing giant listed “a highly educated labor pool” and “a strong university system” as requirements in its recent request for proposals from cities for its second headquarters location.
If companies can’t find such requisite talent domestically, they likely may invest in growth and jobs elsewhere, the lawmakers warned in their letter.
The tuition tax provision, which graduate students around the country are protesting, has not been included in the Senate version of the tax bill. Both chambers of Congress must agree on a combined bill before tax legislation can be passed and signed into law.
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