GOP Tax Plan Could Hit Students Hard

By Michelle Hackman Features Dow Jones Newswires

Bobby Hollingsworth, a first-year biomedical graduate student at Harvard University, who is working on research he hopes will lead to new therapeutic drugs, says he would take a big hit if a small provision of the House Republican tax plan becomes law.

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That provision would tax tuition waivers that schools such as Harvard provide graduate students -- money the students never see -- significantly raising their taxable incomes.

Mr. Hollingsworth currently pays about $3,700 in taxes on a $37,000 research stipend. Under the GOP plan, a $49,000 tuition waiver would bring his taxable income to about $86,000, raising his overall tax bill to about $13,000.

"I don't have a financial backdrop to fall back on," he said. "I'd probably have to drop out. It would be very, very tight."

Mr. Hollingsworth used an income-tax calculator to estimate his taxes under the House proposal, and the calculation appears to be accurate, though it doesn't take into account other parts of the plan, such as changes in tax brackets and deductions, that could affect his overall bill.

The tuition provision is one of numerous tax breaks the GOP plan seeks to eliminate to bring down overall rates. Taxing student tuition waivers would bring in about $5.4 billion in revenue during the next decade, according to an estimate from the nonpartisan congressional Joint Committee on Taxation.

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Ending such breaks could help offset lower taxes for many Americans. But people who rely on these targeted tax breaks -- from people with unusually high medical expenses to those paying off student loans -- could see tax increases.

Many graduate students in the U.S. receive a fellowship or stipend that covers their cost of living in exchange for research or teaching. Graduate students are expected to perform this work while attending classes, though universities frequently waive or reduce that tuition. About 145,000 graduate students received such waivers in 2012, according to Education Department figures.

Under the current tax code, the government doesn't tax these waivers, which students never see in their bank accounts. That is what would change under the House plan.

This week, students at universities across the country staged coordinated protests and launched a series of petitions to Congress. One, started by Mr. Hollingsworth and others at Harvard, garnered more than a thousand signatures.

The tuition measure is one of several that target post-secondary students and university endowments, possibly reflecting a growing skepticism of higher education among conservatives and other parts of the population.

A Wall Street Journal NBC/News poll last summer showed majorities of certain groups -- including men, people under 34, and those who define themselves as white working class -- think college isn't worth the cost, a reversal from four years earlier.

"People who get graduate degrees are a very elite group of people," said Jason Delisle, a resident fellow at the conservative-leaning American Enterprise Institute. "I don't think Main Street America really cares."

At a Tuesday event at the Institute, Rep. Kevin Brady (R., Texas), an architect of the House plan, said the provision would put graduate students on the same playing field as part-time college students.

The tuition-waiver measure doesn't appear in the Senate version of the tax bill. "There was a strong desire...to preserve current education incentives in the tax code," said Julia Lawless, spokeswoman for the Senate Finance Committee, which crafted the chamber's tax legislation.

Education advocates say that as Senate leaders continue to shape their bill and seek additional sources of revenue, they could take cues from the House legislation. "Among the places I fear that they may look are the education provisions in the House bill," said Steven Bloom, director of government relations at the American Council on Education.

Robert Kelchen, a professor of higher education at Seton Hall University, in New Jersey said critics are overlooking other changes in the tax bill that could reduce graduate students' taxes, such as the doubling of the standard deduction. And if the House provision were to go into effect, he said, universities likely would adjust by lowering tuition or raising student stipends.

"I think the results will be more modest than what many people have said, " Mr. Kelchen noted. "I think it will be painful, but not devastating."

Many graduate students and education advocates disagree. By overtaxing graduate students, they say, the tax bill could deter students looking to advance scientific research. About 60% of students receiving waivers are studying in STEM-related fields, according to Education Department data.

"This is a really bad thing if we want to advance in science and technology as a nation, as we would have fewer scientists," said Charlotte Evans, a nanoscale physics graduate student at Rice University.

Bobby Hollingsworth, a first-year biomedical graduate student at Harvard University, who is working on research he hopes will lead to new therapeutic drugs, says he would take a big hit if a small provision of the House Republican tax plan becomes law.

That provision would tax tuition waivers that schools such as Harvard provide graduate students -- money the students never see -- significantly raising their taxable incomes.

Mr. Hollingsworth currently pays about $3,700 in taxes on a $37,000 research stipend. Under the GOP plan, a $49,000 tuition waiver would bring his taxable income to about $86,000, raising his overall tax bill to about $13,000.

"I don't have a financial backdrop to fall back on," he said. "I'd probably have to drop out. It would be very, very tight."

Mr. Hollingsworth used an income-tax calculator to estimate his taxes under the House proposal. The calculation, which takes into account the bill's adjusted tax brackets and a doubled standard deduction, appears to be accurate.

The tuition provision is one of numerous tax breaks the GOP plan seeks to eliminate to bring down overall rates. Taxing student tuition waivers would bring in about $5.4 billion in revenue during the next decade, according to an estimate from the nonpartisan congressional Joint Committee on Taxation.

Ending such breaks could help offset lower taxes for many Americans. But people who rely on these targeted tax breaks -- from people with unusually high medical expenses to those paying off student loans -- could see tax increases.

Many graduate students in the U.S. receive a fellowship or stipend that covers their cost of living in exchange for research or teaching. Graduate students are expected to perform this work while attending classes, though universities frequently waive or reduce that tuition. About 145,000 graduate students received such waivers in 2012, according to Education Department figures.

Under the current tax code, the government doesn't tax these waivers, which students never see in their bank accounts. That is what would change under the House plan.

This week, students at universities across the country staged coordinated protests and launched a series of petitions to Congress. One, started by Mr. Hollingsworth and others at Harvard, garnered more than a thousand signatures.

The tuition measure is one of several that target post-secondary students and university endowments, possibly reflecting a growing skepticism of higher education among conservatives and other parts of the population.

A Wall Street Journal NBC/News poll last summer showed majorities of certain groups -- including men, people under 34, and those who define themselves as white working class -- think college isn't worth the cost, a reversal from four years earlier.

"People who get graduate degrees are a very elite group of people," said Jason Delisle, a resident fellow at the conservative-leaning American Enterprise Institute. "I don't think Main Street America really cares."

At a Tuesday event at the Institute, Rep. Kevin Brady (R., Texas), an architect of the House plan, said the provision would put graduate students on the same playing field as part-time college students.

The tuition-waiver measure doesn't appear in the Senate version of the tax bill. "There was a strong desire...to preserve current education incentives in the tax code," said Julia Lawless, spokeswoman for the Senate Finance Committee, which crafted the chamber's tax legislation.

Education advocates say that as Senate leaders continue to shape their bill and seek additional sources of revenue, they could take cues from the House legislation. "Among the places I fear that they may look are the education provisions in the House bill," said Steven Bloom, director of government relations at the American Council on Education.

Robert Kelchen, a professor of higher education at Seton Hall University, in New Jersey said critics are overlooking other changes in the tax bill that could reduce graduate students' taxes, such as the doubling of the standard deduction. And if the House provision were to go into effect, he said, universities likely would adjust by lowering tuition or raising student stipends.

"I think the results will be more modest than what many people have said, " Mr. Kelchen noted. "I think it will be painful, but not devastating."

Many graduate students and education advocates disagree. By overtaxing graduate students, they say, the tax bill could deter students looking to advance scientific research. About 60% of students receiving waivers are studying in STEM-related fields, according to Education Department data.

"This is a really bad thing if we want to advance in science and technology as a nation, as we would have fewer scientists," said Charlotte Evans, a nanoscale physics graduate student at Rice University.

Corrections & Amplifications

This article was corrected on Dec. 8 at 1:19 p.m. ET because an earlier version incorrectly stated that the income-tax calculator doesn't take into account some parts of the plan, such as changes in tax brackets and deductions, in the fifth paragraph. The income-tax calculator used by Bobby Hollingsworth, a graduate student, to estimate his taxes under the House GOP tax plan takes into account the bill's adjusted tax brackets and a doubled standard deduction.

The income-tax calculator used by Bobby Hollingsworth, a graduate student, to estimate his taxes under the House GOP tax plan takes into account the bill's adjusted tax brackets and a doubled standard deduction. "GOP Tax Plan Could Hit Students Hard," published Nov. 30, 2017, at 2:19 p.m. EST, incorrectly stated that the calculator doesn't take into account some parts of the plan, such as changes in tax brackets and deductions, in the fifth paragraph. (Dec. 8, 2017)

(END) Dow Jones Newswires

December 08, 2017 13:31 ET (18:31 GMT)