ANN ARBOR, Mich. — If the Tax Cuts and Jobs Act becomes law, many graduate students and families are concerned with large tuition tax hikes that some say would cause a “nationwide brain drain.”
This tax reform, as passed by the U.S. House Thursday, would leave many middle to low-income graduate students unable to finance their higher education. As written, H. R. 1 would repeal the tuition waiver tax exemption for graduate students who are teaching and researching assistants. Overall, it would increase costs for college students by $65 billion over the next decade, according to the American Council on Education.
Thursday FOX 17 spoke with graduate students on the University of Michigan’s Ann Arbor campus, who say this tax bill would make their higher education unaffordable.
“I research epilepsy, and I’m studying largely the role of individual cells during seizure states,” said Ellen Wixted, a University of Michigan PhD neuroscience candidate in her second year.
“My work is in epilepsy as well, but rather in genetic causal mutations that can create epilepsy,” said Alexa Faulkner, Grandville High School graduate and University of Michigan PhD neuroscience candidate who is also in her second year.
To illustrate how the Tax Cuts and Jobs Act would negatively impact Faulkner, her graduate tuition is $41,272, but UM waives her tuition in return for her research and teaching for the university. She also earns a $29,605 stipend for her researching, teaching and living expenses.
Currently, Faulkner is only taxed on her stipend. However, under this pending legislation, her tuition waiver would be considered “income.” Effectively, she would be taxed on $70,877 despite the fact she actually earns $29,605. According to Market Watch, Faulkner would then owe nearly $9,000 in federal income tax, which she tells FOX 17 is unaffordable.
“It’s just not tenable,” said Faulkner. “I don’t think that people who are researching diseases and researching human behavior and history and adding to the whole good of society should be basically penalized for doing as such.”
“I would say a nationwide brain drain is relatively accurate. Certainly those who do not come from wealthy families would be particularly disadvantaged by this,” she said.
And as tuition waiver recipients, Wixted says they are barred from working a second job.
“We’re here for sometimes 60 hours a week because it’s really demanding,” said Wixted. “All of this work to do the research to try to cure disease, become a lawyer, all of that, it takes a lot of time.”
While this is a shocking proposition for students currently enrolled, many are also worried about future generations who may avoid graduate degrees altogether.
“If I were to have my tuition taxed, my earned income every year would go up by 66 percent,” said Zach Kopin, University of Michigan PhD candidate for legal history, and National Chair of Student Advocates for Graduate Education (SAGE).
“That’s not money that ever enters our bank accounts, that’s not money we ever see, so taxes on that would significantly increase our tax burden and reduce the number of people who are likely to come to graduate school.”
As the bill heads to the U.S. Senate, students whose educational careers could end because of it urge taxpayers to oppose this.
“Call your representative,” said Kopin.
“I know phone calls are awkward and weird, but you have to use them, that’s the best way to reach your representatives. And make sure you’re talking to grandparents and parents, anybody else, grad students alone cannot stop this.”
In response to FOX 17, spokesperson Tom Wilbur for U.S. Rep. Fred Upton, R – Kalamazoo, released this statement:
“Fred has heard from universities here in our district and state that are concerned about provisions in the House bill that would impact graduate students who receive free tuition. He understands the importance of this issue and believes it will be closely examined as the House and Senate move forward.”
Spokesperson Brian Patrick also released this statement to FOX 17 on behalf of U.S. Rep. Bill Huizenga, R– Zeeland:
“We understand that grad students are working with tight budgets, just like the majority of families across West Michigan. That is why the Tax Cuts and Jobs Act provides relief for lower- to middle-income earners by doubling the standard deduction and significantly reducing tax rates across the board.”
FOX 17 also reached out to U.S. Rep. Justin Amash, R – Grand Rapids, for comment but as of Thursday evening has not heard back.
Currently, the U.S. Senate’s version of tax reform does not include this tuition waiver taxation provision. Kopin and others are hopeful when Congress reconciles the two bills representatives would leave higher education off the table.