US Graduate Students and the Effect of the Trump Tax Increase on Them

US Graduate Students and the Effect of the Trump Tax Increase on Them

Update:  The final tax bill, after reconciliation between the House and Senate, has wisely dropped the taxation of graduate student tuition wavers.

In 2015, 319,000 first time graduate students were attending public universities, and 170,000 in private universities.  The total is about 490,000.  I am assuming first time shouldn’t be confused with first year, as I did before.

Of 204,000 in research universities, 142,000 were in public, and 62,000 were in private.  This breaks down as 70% public to 30% private.

Update, Dec. 7, 2017:  Science Magazine discussed this and uses the figure of 150,000 graduate students being affected by having tuition waivers that will be taxable under the House tax bill.  I will assume that the public to private percentage breakdown is as above, 70% to 30%.  This gives 105,000 in public and 45,000 in private universities.

So here is my rough estimate of what the US millionaires might gain from the enforced taxes on the tuition wavers that these students might have gotten, if the added tax would not have forced them to drop out of or not go to graduate school. The universities also lose the economical teaching assistant services of these graduate students, and the valuable research they would be doing.

Graduate students only make about $20,000 to $40,000 a year doing teaching assistant or graduate research. If in a public university, their tuition waiver may be worth around $15,000. If in a private university, their tuition waiver may be as high as $50,000.

At the University of California, UC Graduate students earned $250 million in tuition benefits in 2015-16.

Two graduate students at UC Berkeley, Kathy Shield and Vetri Velan, made a web tax calculator for graduate students. They also compared a public university, UC Berkeley’s, graduate student’s new taxes, and those of an MIT graduate student.

At UC Berkeley, with $24,241 income and $4,304 health insurance, and a $13,793 now taxable tuition, the extra taxes are $1,385. So out of the disposable income, this tax increase is a 5.7% loss to the student.

At MIT, with $37,000 income, $3,000 health insurance, and now a $49,580 tuition waiver to be taxed, the student’s taxes were increased by $9,584. Out of their disposable income, the added tax takes away 26%!!!

We apply these to all the 105,000 students at research universities with tuition waivers.  For public, we get $1,385 X 105,000 = $0.145 billion. For private university students, we get $9,584 X 45,000 = $0.431 million. The total of both is $0.576 billion, to be raised by these new taxes.

Let’s put this in perspective. For a mere $4.0 billion per year in new taxes, the Republicans and President Trump, with their guarantee of many more jobs, with Trump’s son-in-law heading an innovation panel, is about to strip many of the best and brightest graduate students in private universities, of a quarter of their income, and drive them into industry or high school teaching. Since graduate students take classes for two years and do research for three years, they will kill the innovative capabilities and highly technical training of three research generations of US graduate students over the decade of the tax cuts, or the possible eight years of the Trump reign, including a year to pass a new tax bill.

For more perspective, consider the $1.5 trillion or $1,500 billion deficit of the ten year gift to the rich from the Trump tax bill. At best, only $400 billion could be made up by growth, or more probably, nothing.  On a yearly basis,  we take the new debt as $150 billion per year.  The $0.58 billion taken from struggling graduate students is only o.39% of the debt created by the total tax bill.

Over the 10 years of the tax bill, the tuition waiver tax collection from struggling graduate students will be $5.8 billion.  An estimate of how much the eventual repeal of the 40% estate tax will save the richest people is in Mother Jones, easily calculated from the Forbes ranking.  For Donald Trump, at an estimated wealth of $3.1 billion, it would be $1.24 billion.  So about a fifth of the 150,000 graduate students, or 30,000 graduate students will be taxed on their tuition waivers for ten years to pay for Donald Trump’s tax gift to his heirs.

About Dennis SILVERMAN

I am a retired Professor of Physics and Astronomy at U C Irvine. For a decade I have been active in learning about energy and the environment, and in lecturing and attending classes at the Osher Lifelong Learning Institute (OLLI) at UC Irvine.
This entry was posted in Congress, Donald Trump, Taxing Tuition Wavers, Trump Tax Cuts, UC Berkeley, Wealth. Bookmark the permalink.

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