If the GOP is going to propose slashing corporate taxes, it has to make up the funds somewhere. And one of those places, apparently, is going to be at universities.
The recently proposed tax plan would make the burden for student loans more painful, significantly increase taxes for Ph.D. students and target rich universities’ endowments — the consequences of which could be catastrophic.
The tax plan would repeal crucial incentives meant to lessen the burden of higher education costs, especially for low-income and first-generation college students. Tax analyst Scott Greenberg called these tax deductions “sacred cows” on Twitter. Under the Lifetime Learning Credit, low-income students were exempt from taxes for up to $2,000 a year for tuition expenses, while corporations were offered a deduction for education assistance plans. But with the GOP’s tax plan, those benefits would be revoked. It would also force students to pay taxes on their student loan interest.
And Ph.D. students will see their taxes rise dramatically. These students do not pay tuition at their universities in exchange for their research work and teaching assistantships, but, under the GOP’s tax plan, they will still pay taxes on the tuition they do not pay. That’s because the GOP would classify this tuition waiver as income; an analysis by Vox showed that if a Ph.D. student receives $30,000 in income and receives a $30,000 tuition waiver, they might have to pay taxes on an income of $60,000, which more than doubles their tax burden because it would push them from the 12-percent tax bracket to the 25-percent tax bracket.
That change is shocking. Ph.D. students already make a measly average income of just over $30,000, according to Glassdoor. And The Atlantic reports that, despite not having to pay a fifth of Ph.D. students have over $30,000 in student loan debt upon completion of their program. That’s if they make it at all; half of doctoral students drop out of graduate school, according to The Chronicle of Higher Education.
Increasing the burden on both undergraduate and graduate students — who already face significant financial barriers — is not just bad for them, but bad for all of us. The change to Ph.D. students’ income significantly increases their financial obligations, disincentivizing the doctoral path and making it less accessible. It would exacerbate the obstacles low-income students face, for whom reaching graduate level education is already an achievement of massive proportions. Moreover, it means that people who could forge life-saving medical treatments and groundbreaking policy analysis — people who could solve the problems of tomorrow — might never get the skills they need to do so.
For universities, there are other important new taxes, too, with important implications. Hungry to compensate for corporate tax breaks, the GOP plans to tax some universities’ endowments and compensation for its highest-paid employees. Rightfully so, some say — billion-dollar endowments and executive compensation north of $1 million have raised eyebrows — but taxing these might not actually incentivize universities to lower tuition or curb spending. Demand for college is still relatively inelastic, so nothing stops universities from continuing to pass costs onto consumers; greater tax expenses could justify even greater increases in already sky-high tuition.
Finally, the tax plan would also target charitable gifts to universities. As Brian Flahaven, senior director for advocacy at the Council for Advancement and Support of Education, told The Chronicle of Higher Education, the 30 percent of tax filers that can currently itemize their charitable donations would fall to only 5 percent. That could, according to the National Council of Nonprofits, cause a $13 billion annual decrease in charitable giving, including to universities. That sizable of a decrease in funding for universities threatens their ability to attract high-level faculty and provide students with adequate resources.
The GOP’s tax plan spells bad news for students and universities, and anyone with an interest in the future of our nation’s higher education should be concerned. Kim Dancy, a senior policy analyst, made a prudent point in an op-ed in CNN.
“Rather than improve the existing program, the GOP plan scraps it entirely, along with several other provisions that make higher education more affordable for students and their families,” Dancy said. “Worse, instead of using the savings to support students in other ways, the GOP bill would enable corporate tax cuts and a phased-in repeal of the estate tax, among other changes.”
And there’s the twist of the dagger. Corporations and high-level executives might rejoice at seeing their taxes slashed, but students — and the future of higher education — are paying the price for it.
Sonali Seth is a senior majoring in policy, planning and development. She is also the special projects editor of the Daily Trojan. “Point/Counterpoint” runs Wednesdays.