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Grad Students Would Be Hit By Massive Tax Hike Under House GOP Plan

Nov 14, 2017
Originally published on November 15, 2017 10:26 am

There are a lot of anxious graduate students at universities around the country right now.

That's because to help pay for more than $1 trillion in tax cuts for U.S. corporations, the House Republican tax plan would raise taxes on grad students in a very big way. These students make very little money to begin with. And many would have to pay about half of their modest student stipends in taxes.

"The past week this is what I've been talking about with other graduate students, with classmates. I think we're all shocked," says Tamar Oostrom. She's in her third year of getting her Ph.D. in economics at the Massachusetts Institute of Technology.

She and her classmates have been crunching the numbers. "This bill would increase our tax by 300 or 400 percent. I think it's absolutely crazy," Oostrom says.

In exchange for helping to teach courses or working with professors on research projects, MIT gives students such as Oostrom a modest $30,000 stipend. And as part of the deal she also doesn't pay tuition. The arrangement is typical for many students at MIT and other universities.

That tuition price tag at MIT is technically about $50,000, even though students like Oostrom don't have to pay it. Under the tax plan proposed by House Republicans, these students would have to report that tuition forgiveness as income.

Ryan Hill, a fourth-year Ph.D. student at MIT, already pays taxes on his $30,000 stipend. But, he says, adding in the value of his free tuition, he'd have to pay taxes as if he made $80,000 a year. And that's a massive difference for Hill and his wife, who works part time on top of caring for their new baby.

"I wish we didn't have to stress about money as much as we already do," Hill says. "It's been already very hard to just emotionally get through this time of life because we have to be so frugal."

The couple already gave up dental insurance to save money. And Hill says his wife sews clothes for their baby so they don't have to buy clothes.

About 145,000 grad students received a tuition reduction in 2011-12, the American Council on Education says.

Hill and other MIT students say the tax proposal is ill-conceived. So do economists, who say it would discourage Americans from seeking advanced degrees at a time when the country badly needs a better educated workforce.

Kim Rueben, a senior fellow in the Urban-Brookings Tax Policy Center at the Urban Institute, said the plan wouldn't harm just grad students. If young people opt out of graduate education, the damage would be felt throughout the economy.

"Dollar for dollar, this might be the most misguided part of the plan," she says. "What you're doing is increasing the cost of going to graduate school ... and ignoring the fact that the government makes much more money if people have more education."

So, Rueben says, the relatively small amount of money taken from grad students to pay for other cuts would stymie the country's growth in the future.

Larry Lyon, vice provost and dean of Baylor University's graduate school, was blunt. "I've been promoting graduate education for over 20 years," he said, and the plan is "probably the most serious threat to doctoral education we have ever experienced."

Other university administrators across the country appear to be just as appalled as students — the American Council on Education sent a letter to Congress decrying the plan. The letter was signed by over 30 academic organizations, including the Association of American Universities, the Council for Advancement and Support of Education and the American Psychological Association.

The provision exists only in the House tax bill, not the Senate version. Many graduate students are hoping that the proposal doesn't end up seeing the light of day.

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ELISE HU, HOST:

Now to some numbers in the Republican tax plan - to help pay for more than a trillion dollars in tax cuts for U.S. corporations, the plan would raise taxes on some Americans, including graduate students. They famously make very little to begin with. And the tax hike on them would be huge. Here's NPR's Chris Arnold.

CHRIS ARNOLD, BYLINE: A lunchtime talk about the Republican tax plan is getting underway at MIT. Now, a talk about tax policy might sound kind of boring, but the room is packed. Grad students are wide awake and focused on this tax plan because of what it would mean for them.

TAMAR OOSTROM: The past week, this is what I've been talking about with other graduate students, with classmates. I think we're all shocked.

ARNOLD: Tamar Oostrom is a third-year economics Ph.D. student. She and her classmates have been crunching the numbers. And the impact is pretty flabbergasting.

OOSTROM: This bill would increase our tax by 300, 400 percent. I think it's absolutely crazy.

ARNOLD: OK, here's how this works. Many grad students - on top of their studies - they basically have campus jobs. They do research for professors. They teach classes. And in return, they get a modest stipend, and they don't pay tuition.

RYAN HILL: I do a lot of teaching in order to get that tuition waiver.

ARNOLD: Ryan Hill is in his fourth year of getting a Ph.D. MIT pays him a stipend of around $30,000. Students pay taxes on that already. But tuition technically costs $50,000 a year. Hill doesn't pay that. He gets that for free. But the Republican tax plan would make grad students count the value of that free tuition as income, which means a big tax increase. Many would have to pay about half the actual money they get, their stipend, in taxes.

Hill and his wife just had a baby. She's working part time.

HILL: I wish we didn't have to stress about money as much as we already do. It's stressful for both of us and especially when you're so busy with your family and school. And it's been already very hard to just emotionally get through this time of life because we have to be so frugal.

ARNOLD: Hill says he and his wife gave up having dental insurance to save money. His wife is sewing clothes for their baby so that they don't have to buy them. So the grad students here might be studying super advanced stuff - artificial intelligence, nano materials - but they live very Spartan lives. Hill's from Utah. And he says everybody in his family's a Republican.

HILL: It's a very conservative part of the country. I was registered as a Republican.

ARNOLD: He recently became an Independent. But he says that this plan from Republicans in Congress for a big tax hike on grad students just makes no sense.

HILL: I just was shocked. From an economics perspective, like, a basic principle is that when you tax something you get less of it.

ARNOLD: Meaning this tax would mean fewer grad students - many young people just wouldn't be willing to go into massive debt, he says. They'd just go get a job instead of getting a Ph.D. And that would be a problem because any economist will tell you that the country needs a more highly educated workforce. That's where the good-paying jobs are. It drives innovation.

KATIE SHULENBERGER: Putting a tax on that and putting a barrier to us getting that education to be able to do that doesn't make sense.

ARNOLD: Katie Shulenberger's getting a Ph.D. in chemistry.

SHULENBERGER: What I want to do with my life is I want to be a professor. I want to teach.

ARNOLD: But right now she's huddled with other members of the MIT Graduate Student Council. They're planning a Call Your Representative In Congress event for fellow students.

UNIDENTIFIED MAN: We definitely want to be before any sort of floor debate.

SHULENBERGER: The House floor debate...

UNIDENTIFIED MAN: Yeah...

SHULENBERGER: I don't know...

UNIDENTIFIED MAN: ...We'll find out.

SHULENBERGER: ...I mean, I just read another article online that said, like, they're actually taking note of graduate students' mobilizing and response to this, so it's not...

ARNOLD: Their bottom-line message - don't slap a huge tax on low-wage earning grad students to help pay for a trillion dollar corporate tax cut. And university administrators across the country are calling Washington, too. One we spoke to said this is, quote, "the most serious threat to doctoral education ever." The proposal, though, is only in the House bill, not the Senate tax bill. So a lot of graduate students are hoping it doesn't survive. Chris Arnold, NPR News.

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