The universities also don't pay many of the grad students, particularly in the sciences. Instead, the students are funded by training grants (to the department

The universities also don't pay many of the grad students, particularly in the sciences. Instead, the students are funded by training grants (to the department or program), and as RAs on grants to individual faculty members. These overwhelmingly come from federal sources, so the net impact on the budget is likely to be zero: these grants would need to increase to cover the taxes, which would then go right back to the feds. I could get behind funding fewer grad students and using that money to actually do some research instead, but I think asking grad students to absorb a $3,000 pay cut on a $20-30k salary is pretty harsh, especially since many of the "tuition" payments don't cover an actual class.