The recently released tax reform legislation proposes to tax the tuition waivers that graduate students receive as part of their teaching and research work. Currently up to $5,250 in tuition per year is exempt from taxation.
I am writing to express my concern about the impact this will have on students who can least afford it, and on education in Minnesota and the United States. I was a graduate student at Stanford, before working for a startup company and ultimately returning to Minnesota, where I had done my undergraduate studies. The paycheck I received for teaching assistantships and research assistantships was far less than I could have been earning in industry. It was a struggle to find housing that was affordable and yet close enough to campus that it didn't interfere with my studies. While I was not living in poverty, many students with families found it much harder to make ends meet.
I, at least, had low student debt and the prospect of high-paying employment in my field of study. I was also attending a prestigious university and a department that was well-funded.
A decade later, costs of attending college have gone up. Students who form the bulk of college and university teachers for the next generation face very difficult choices.
For a concrete example, Stanford's current minimum rate for a TA is $9,630 per quarter for half-time work. (The other half is, of course, dedicated to classes and research.) At $38,520/year under the Republican tax plan, the student would owe taxes on $22,320 salary and $10,260 of tuition waivers. At the 12% bracket this comes to $5,853 in federal income tax. More than one-fifth of that, $1,231, is due to tax on money that the graduate student never sees: it is paid by the university, to the university. $1000 is a lot of money to a graduate student, even at Stanford.
Adding to the tax burden of those at the very start of their careers, who may just be starting their families, can only discourage people from graduate education. But Minnesota needs a next generation of PhDs to train its students in science, mathematics, and the humanities. Our educational strength is a key driver of economic growth.