Sessions wants to retain grad students’ tax break
House provision that would eliminate it is ‘misguided,’ he says
WASHINGTON — Dallas Rep. Pete Sessions is pressing GOP leaders to ensure that the party’s final tax revamp preserves the tax-exempt status of a critical tuition reduction used by tens of thousands of graduate students across the U.S.
That tax-free standing, tied to those students’ work as teaching or research assistants, has hung in the balance for weeks after the House-approved version of the tax bill marked it for elimination.
Such a change would make the reductions count as taxable income, skyrocketing the burden for many grad students already feeling a financial squeeze. And though schools would probably try to blunt the impact, the proposal has prompted passionate push-back in Texas and beyond.
Sessions on Thursday rallied more than 25 fellow House Republicans, including six other Texans, to sign a letter to object to what he called a “misguided tax.”
The chairman of the House Rules Committee said a new levy on tuition waivers would add to the “growing epidemic” that younger Americans face from substantial student loans. He said it would penalize “students who want to get ahead and gain an edge in their fields.”
And he indicated that the higher education world’s concerns are being heard by the likes of Rep. Kevin Brady, the House’s top tax writer.
“He will do a lot better,” said Sessions, who has heard from students at Southern Methodist University and other Dallas-area schools. “His sensitivity on the issue has been raised because of the tremendous feedback from so many members, who’ve heard from people back home.”
The tuition provision is among the dozens of differences that must be worked out between the House and Senate versions of a sweeping $1.5 trillion tax revamp.
House Republicans included the tuition piece in their bill as part of a slate of changes that have stirred colleges and universities. Sessions, who voted for that House version, said Brady was “well-meaning” in crafting the tax bill but was “trying to balance out in several areas.”
And Brady, a Republican from The Woodlands, on Thursday reiterated a pledge to “work toward a good, positive outcome” on the issue.
Senate Republicans, notably, did not remove the tuition tax break — one of several contentious House changes they avoided.
“We shouldn’t be taxing tuition benefits,” Texas Sen. Ted Cruz said last month in a CNN debate. “It’s not in the Senate bill. And I’m quite confident it won’t be in the final bill.”
The tuition proposal, if it were to stick in the final bill, would affect about 145,000 graduate students and 27,000 undergraduate students, according to the American Council on Education. It would also affect other school employees who’ve used the break for themselves or their family.
That’s because it would delete a portion of the tax code that tax-exempts tuition reductions provided to college employees, including grad students who work by teaching or researching.
Democrats have pilloried the House GOP provision as part of a broader charge that the revamp would boost the wealthy over all others. Sessions, for instance, has been the target of a TV ad from the liberal group Not One Penny that says he’s supporting a giveaway to the rich.
And many grad students in Texas and beyond have made clear that the tax-free tuition reduction is make or break.
“This is a huge deal,” Courtney Lacy, a doctoral student at SMU, told The Dallas Morning
News last month. “It’s the reason that I’m able to go to graduate school at all.”
Some higher education experts have suggested that universities might be able to limit the potential pain by simply reclassifying the tuition waivers as tax-free scholarships. But many others said that schools would be limited by both legal and financial factors.
Given the ongoing pushback — including protests this week in Texas and in D.C. — lawmakers might be keen to just keep the tax exemption on tuition reductions.
The six other Texans signing onto the letter to “strongly oppose” the tuition tax change were Reps. Jodey Arrington of Lubbock, Michael Burgess of Pilot Point, John Culberson of Houston, Blake Farenthold of Corpus Christi, Bill Flores of Bryan and Lamar Smith of San Antonio.