Republican tax proposals will remove tax credits and deductions for students and make universities less competitive, university and research associations are arguing.
The Tax Cuts and Jobs Act as proposed by president Donald Trump is being deliberated in Congress. If passed into law, it would see some graduate student taxes double. In addition, universities are set to lose tax-exempt status for their endowments.
As a result, in the long-run universities will lose out on some of the best researchers, which will threaten America’s global research leadership role, according to research societies.
“Research universities are pillars of American society, enabling countless young people to attain post-secondary education and preparing them for participation in our dynamic 21st century economy,” said the Association of American Universities in a statement.
“As part of the government-university partnership, these universities conduct research on behalf of the American taxpayer, to create new technologies, fortify our national defense, and bolster our economic competitiveness,” the association, which represents 62 organisations, said.
Approximately 145,000 graduate students benefited from a tuition-fee reduction between 2011 and 2012, including 25 percent of PhD candidates and six percent of those who sought a masters degree. The Tax Cuts and Jobs Act proposes to levy a tax on such waivers.
According to the Federation of American Societies for Experimental Biology, taxing tuition waivers would hurt the most vulnerable, as 55 per cent of students earn around or less than $20,000 annually.
“Changes in the tax code that create financial hardships for students pursuing a graduate education threaten to erode the US’s role as a world leader in research. Therefore, FASEB urges Congress to preserve the tax exemption for graduate student tuition waivers,” the organisation said in a statement.
At present, there are two versions of the tax plan: one from the Trump administration and another from the Republican-dominated House of Representatives.
The administration’s tax proposal, worth around $1.5 trillion, seeks to cap student tax benefits at $2,625 a year. Graduate students, who are involved in teaching or research and receive waivers or living stipends, would also be required to report these as income.
The House version of the Tax Cuts and Jobs Cuts Act, which is more severe, sees a deletion of Section 222, which provides tax deductions based on student merit; a deletion of Section 117, allowing public institutions to provide tax-free tuition waivers; repeals Lifetime Learning Credits and employer-provided education assistance.
According to the non-partisan Congress Joint Committee on Taxation, the removal of the student-loan interest deduction would save the federal government $11.9 billion over the next five years. But Ted Mitchell, president of the American Council on Education, said the Act would increase the cost of attending college for students by more than $65 billion between 2018 and 2027.
The House Ways and Means Committee passed the bill on 9 November and it is due to go before the full House of Representatives for a vote before Thanksgiving. The Senate bill will go through both chambers and any differences will have to be resolved for it to pass before the end of the year.
If successfully passed, most provisions of the Tax Cuts and Jobs Cuts Act are scheduled to take effect from 1 January 2018.
This story appeared in Research Europe on 16 November 2017