The GOP bill eliminates §117(d) in the U.S. tax code, a provision that exempts “qualified tuition support” for research and teaching assistants from being counted towards gross income.
This means that a student whose funding comes in full or part from a teaching or research assistantship at Princeton will be paying taxes not just on their stipend and any additional teaching/research income, but also on the roughly $49,000 Princeton tuition as “non-cash income.”
Fortunately, students who are on fellowships would not see their tuition support counted towards taxable income. §117(a), which exempts “qualified scholarships” from taxation, would remain on the books. But most Princeton students receive at least part of their funding from assistantships during the course of their Ph.D. program and would therefore be affected by the tax bill.
STEM students would be hit particularly hard, since more of their income comes from assistantships than it does for their colleagues in the humanities and social sciences.
What does this mean in practice?
Here’s how the tax breaks down:
Gross income is $31,100. Take the standard deduction — in 2017, $6,350 — for a gross taxable income of $24,750. The first $9,325 is subject to ten percent tax ($932.50) with the remaining $15,425 subject to 15 percent ($2,313.75).
This means that the total tax bill (assuming no other deductions) of a Assistantship in Instruction for 2017 would be $3,246.25 — an effective tax rate of 10.4 percent
How much would this student pay under the proposed tax bill?
Princeton tuition, plus the student health plan fee, is $48,940. Add that amount to the income the student earns through the stipend to get $80,040. The new standard deduction under the proposed plan is $12,200, so subtract that from $80,040.
The student owes taxes on $67,840.
The new brackets tax income up to $45,000 at 12 percent, and income from $45,000 to $200,000 at 25 percent.
So the student would owe $5,400 on the first $45,000 of “income,” and $5,710 on the subsequent $22,480 of income.
The total tax liability (assuming no other deductions) for this student would be $11,110, roughly 36 percent of actual income.
This would be a devastating tax increase, particularly when the University itself estimates living expenses for twelve months in Princeton to be $30,300.
International students would also be hit especially hard. Many international students already pay more in U.S. taxes than their American counterparts, although it can vary. A $10,000 tax hike on top of an already-expensive tax bill will make attending American universities for graduate study — even elite, well-funded programs like Princeton’s — much less attractive for international students.
The Republican tax proposal could, in effect, make it impossible for American universities to retain their competitive edge globally. Why study at Princeton (or Harvard, or Stanford, or MIT) and see your income dry up due to taxation when you could attend Oxford, Cambridge, Lausanne, or Tsinghua and face a much ?
Policy analyst Barmak Nassirian recently that the tax bill would mean “the end of research in the United States.” This is not an exaggeration. The proposed bill would cripple graduate programs across the country — even at elite universities — and correspondingly grind laboratory research to a halt. American universities would no longer be attractive to international students. The United States would face an unprecedented brain drain.
What can you do? Right now, this is a proposed bill. It has not gone into law yet. Contact your representatives and let them know that this bill will be devastating for graduate students.
You can also get involved with (full disclosure: I am a member), who are calling on the University to aggressively lobby against 117(d) repeal and to guarantee graduate students’ current net income in the event that the bill becomes law.
And this is not just a task for graduate students. I’ve written extensively about this tax reform bill over the past week, and I’ve heard from faculty across the country. “Gee, if I were in grad school today, I don’t know what I would do!”
Well, there are students in graduate school today — your students. We need your support! Call your senators and representatives and tell them that the Republican tax reform plan would devastate your students and cripple your programs.
Bonnie Watson Coleman is the congresswoman who represents Princeton’s district. Her contact info is below:
BONNIE WATSON COLEMAN:
Washington, DC Office
1535 Longworth House Office Building
Washington, DC 20515
Phone: (202) 225-5801
Fax: (202) 225-6025
David Walsh is a graduate student in the Department of History. He can be reached at firstname.lastname@example.org.