Taxing graduate tuition will hurt America

Innovation would suffer under House student waiver proposal

Now that the Senate passed its version of tax reform, the bill heads to the House for reconciliation before the final version can be sent to President Trump. The two bills have much in common — cuts in corporate tax rates, elimination of personal tax deductions, changes in the estate tax — as well as a key difference that has not received significant attention and could cripple this region’s economy for decades to come.

The House version would tax graduate-student tuition waivers, taxfree money that graduate students receive to pay tuition and fees.

The stakes are high, for the students and the local economy but also for the nation’s long-term future.

In my institution, the University of Houston, tuition waivers for graduate students are competitively awarded through the Graduate Tuition Fellowship program, which covers the cost of in-state tuition and mandatory fees for qualified graduate students. To receive the GTF, graduate students have to have a minimum grade-point average of 3.0 out of 4.0, have satisfactory progress in course work and timely progress toward their degree.

Graduate students also pay rent, buy groceries and, yes, go to the movies (occasionally), so depending on their program they also receive a monthly stipend that ranges from $600 to $2,500 during the academic year. In exchange they work 20 hours a week on classroom instruction, academic advising, reading papers and examinations, supervision, research (in more than 60 percent of the inventions produced in 2017, graduate students are listed as co-inventors) or other administrative responsibilities, in addition to their school work.

What could happen under the current tax reform?

The House version would basically treat tu-

ition waivers as taxable income, while the Senate bill leaves graduate-tuition waivers untaxed. If the Senate version prevails, the status quo will remain in place. If the House version prevails, however, graduate students would be hit hard. So would universities and the Houston region.

A student earning a stipend of $18,000 a year and receiving a waiver for about $10,000 in tuition and fees, for example, currently pays around $750 in federal income tax. If the tuition and fees were counted as taxable income, the student’s tax bill would go up to about $1,850 a year under the House plan.

Why should we care about affordable graduate education?

Although paying $1,850 a year on federal taxes rather than $760 might seem modest, it could price graduate school out of reach, especially for students from lowerincome families, or it could mean a months’ worth of rent, food and gas for many others. The true damage, however, is not only the personal cost, but the risk that the United States and Houston fall behind in the global race to create cutting-edge technologies, knowledge, art and music. America’s universities are not only the quintessential driver of the American Dream, they are generators of human capital that have kept the United States at the forefront of innovation. Taxing graduate education will destroy this country’s renowned ingenuity and will make us less competitive and more dependent on other countries’ technologies, which clearly is not the right way to make America great again.