The below was sent to Congressman Dave Brat (VA-7th) regarding the U.S. House of Representatives tax reform bill that passed this week:
I am writing to you with respect to the “Tax Cuts and Jobs Bill” that just passed that House of Representatives that you voted in favor of. While I commend you and your colleagues’ attempt to reform and restructure the tax code, which is badly needed, I am deeply concerned with the removal of Section 117(d) of the US tax code which classifies tuition reductions for graduate students as non-taxable. Removing this effectively converts tuition wavers — which universities generally grant to graduate students based on teacher assistant (TA) work that they do — into taxable income. This will increase the tax burden on individual graduate students by, in many cases, over $10,000/year, and effectively disincentives Americans from pursuing graduate degrees. At a time when America must double-down on encouraging citizens to pursue advanced degrees in order to remain globally competitive — especially in STEM — I am baffled that we would change the tax code to actively discourage Americans from receiving this highly-skilled training. This change could have long-term, damaging consequences for our workforce and our economy. And for what? For roughly $1-$2 billion tax dollars (based on the reasonable assumption that 145,000 affected students would owe, on average, $10,000 more in taxes per year). This represents four-hundredths of one percent of our entire federal budget in 2017. We could raise the same amount of money just by adjusting the corporate tax cut found in this bill by a mere rounding era. (In order to raise ~$1 billion more from the $2.1 trillion in U.S. corporate profits in 2016, we would need to raise corporate taxes by less than a hundredth of a percent!)
In addition to hurting graduate students by increasing their individual tax burden and putting longterm American competitiveness at risk by pushing folks away from graduate degrees, this provision of the “Tax Cuts and Jobs Bill” creates a more difficult operating environment for United States corporations. From 2010 to 2012, I worked in Microsoft’s U.S. Government Affairs office in Washington, D.C. and a primary concern that the company dealt with then — and now— was the lack of U.S. Ph.D. graduates coming from STEM fields. In fact, in a given year, Microsoft Corporation would hire more computer science Ph.D.’s than the total number of U.S. citizens graduating with a Ph.D. in computer science in that year. Given this, and the United States’ inadequate H1-B visa program, Microsoft opened up a research lab in Vancouver, Canada, in order to hire Ph.D.’s from around the globe and bring them to Canada, which had (and still does have) friendlier immigration policies than the United States. Given that there is already this shortage of graduates with advanced degrees to work American jobs, why make it harder on our companies by including this provision?
As a final appeal, I imagine that you, a Ph.D. yourself, know personally how helpful tuition waivers are for students pursuing graduate studies. In fact, these waivers, and the assumption that they were non-taxable, may have been the difference that made your decision to pursue an Economics Ph.D financially viable.
Thank you for your time, and I strongly urge you to advocate for removing tuition waivers from taxable income when the bill comes back to the House.