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My alternate headline: GOP Tax Plan will force institutions to alter graduate tuition accounting Tuition waivers are currently used, especially in the science

My alternate headline: GOP Tax Plan will force institutions to alter graduate tuition accounting Tuition waivers are currently used, especially in the science disciplines, to have outside research grant dollars pay for grad-student tuition. If this tax plan passes, tuition waivers would no longer make sense and the dollars from research grants would need to shift. This probably means lower tuition for certain programs and more money from the research grant going to institutional administrative costs.

numbsafari 9y ago
Exactly. Personally, I'd like to see a balanced approach: shift some of the money to increase those laughable stipends into something livable, and put the rest where it belongs: on admin costs. The shell game universities are playing is part of the problem. Hopefully, if this change makes it into the final bill, Universities do the right thing and don't stick it to their Grad Students.
- test6554 9y ago
  Can you elaborate more on what is going on at universities? Are you saying that grant money comes in for research, but gets funneled back to the university through tuition?
  - HarryHirsch 9y ago
    That's correct, part of grant money is allocated to salaries for graduate students and postdocs, sometimes even salaries for the professor himself. The corollary is that any PhD program in the sciences where it's the student who pays the tuition is worthless. Another part of a research grant goes to the institution, that's the dreaded "indirect costs".
  - wahern 9y ago
    The default tax rule in the U.S. is that any benefit you receive, in any form, is earned income and taxable. Layered atop that default rule are a long list of exceptions, which are generally categorized as (1) exemptions and (2) deductions. If you attend a Ph.D program where the advertised tuition is $30k per year, and you get a tuition waiver (or w'ever it's called), the default tax rule says that you still earned income because you received a benefit. The nominal value of that benefit is $30k, therefore the student would need to pay taxes on that $30k. Apparently there's an exemption or deduction that excepts tuition waivers from the default rule, meaning such tuition waivers wouldn't be considered taxable income. As part of the GOP plan to pay for corporate income tax rate cuts, they must discard many kinds of exemptions and deductions to replace lost revenue from the corporate rate cuts. To those who say that this is a shell game[1], note that if it was just a shell game then the change wouldn't have been made. In other words, there's an expectation that discarding this exclusion will generate more revenue. That revenue would directly come from students and/or universities, one way or another. Universities could lower tuition, but one reason for the disparity between nominal tuition and effective tuition is that foreign students disproportionately pay the nominal tuition. Reduce nominal tuition and you reduce the foreign subsidy for domestic students. Not only does the effective price of a graduate education go up, but you're likely to see even more foreign students. Depending on which country you hold citizenship, that's either good for your career prospects or bad for your career prospects. [1] All the news reports make a point of saying that the university "pays" the tuition waiver. It's a distinction without a difference. The student still derives a benefit, and however the university cares to balance its books (e.g. with double-entry accounting) is entirely irrelevant unless there's incredibly esoteric technical requirement to the particular earned income exception. Such esoteric technical requirements are rare since the 1986 reform as the text of modern rules emphasize underlying economic benefits and not accounting practices, as focusing on the latter create more opportunities for gaming the tax code.
    - maxerickson 9y ago
      Getting rid of exemptions and deductions is also "simplification" and "reform". I mean, I agree that the plan is focused on paying for corporate and high end tax cuts, but how do you do tax simplification if special interests are all off limits?
      - nindalf 9y ago
        You don't. The complexity of the tax code isn't a bug, its a feature because people don't want a simple code, they want a simple code _with_ all the exemptions they're likely to use.
      - wahern 9y ago
        Special interests is just code word for other people's deductions. The fact of the matter is that the 1986 tax reform _already_ tremendously simplified the tax code. Much of the cynicism about the modern tax code is latent from the 1986 reform effort, when politicians were drumming up support for very difficult changes. Before 1986 individuals could take deductions on interest payments, for example, just like businesses; after 1986 individuals were only left with the mortgage interest deduction. On the other hand, the corporate code was also tremendously simplified, and like I said did away with esoteric technical requirements rife with loopholes. People were willing to give up their exceptions because corporations lost a lot of theirs, and everything at least felt more equitable. I would argue that the major thrust of the current reform effort is neither simplification nor a quid pro quo. Even with 30 years of accreted deductions, things are incomparable to the pre-1986 system. The major thrust of the current reform effort is simply to shift more of the tax burden from corporate taxes to individual taxes. I don't know why, but I'm sort of ambivalent about all of this, frankly. Perhaps partly because a significant number of of my yearly deductions are business deductions, which I know the GOP won't touch. I think it's dishonest to sell the current reform as simplification, because while some aspects are being simplified, that's neither the underlying motivation nor design. The thrust of the current reform effort is simply to cut corporate rates and replace that lost revenue with revenue from personal income taxes. So, for example, personal exemptions are being folded into the standard deduction and sold as a "simplification". But the only reason for doing that is to hide the fact that such a combined deduction will be less than the current standard deduction+exemptions. Those things are separate for a simple reason--the standard deduction is fixed per household, but the personal exemption is per household member. It could have equally been simplified by getting rid of the standard deduction and increasing personal exemptions, but doing that wouldn't have raised revenue. And that's why it's disingenuous to sell this as simplification--the primary purpose is to generate revenue from personal income taxes to offset reductions in corporate income taxes. There are many reasonable arguments for supporting the GOP tax plan. But people should be wary of rationalizing things in a way that causes them to support or reject the plan even though it fundamentally disagrees with their personal policy preferences. EDIT: Quote from a 2011 review of the 1986 reform: "[The 1986 t]ax reform was not only revenue neutral but also roughly distributionally neutral: This tax reform was not to become an occasion for significantly shifting the distribution of income tax burdens among income classes. So distributional neutrality, along with revenue neutrality, became guiding principles for the legislation." Source: http://www.taxhistory.org/www/features.nsf/Articles/066C3B71D4C8F8CA85257930006459EE?OpenDocument http://www.taxhistory.org/www/features.nsf/Articles/066C3B71...
- sliverstorm 9y ago
  Why do research grants belong paying admin costs? I thought they were for, you know, conducting research. (Yet apparently most universities already take something like a 50% cut)
  - adenadel 9y ago
    I think the original intent is to pay for overhead (lab space, core labs that provide services, office space, etc.) but maybe the administrative bloat has grown to absorb more research money just as it makes up a large portion of total university expenses.
deleted 9y ago
[deleted]
seanmcdirmid 9y ago
Don’t tuition waivers come out of grant overhead anyways? In that case, the amount of a grant going to research wouldn’t change, just divisions in how the overhead is allocated.

numbsafari 9y ago

Exactly. Personally, I'd like to see a balanced approach: shift some of the money to increase those laughable stipends into something livable, and put the rest where it belongs: on admin costs. The shell game universities are playing is part of the problem. Hopefully, if this change makes it into the final bill, Universities do the right thing and don't stick it to their Grad Students.

test6554 9y ago
Can you elaborate more on what is going on at universities? Are you saying that grant money comes in for research, but gets funneled back to the university through tuition?
- HarryHirsch 9y ago
  That's correct, part of grant money is allocated to salaries for graduate students and postdocs, sometimes even salaries for the professor himself. The corollary is that any PhD program in the sciences where it's the student who pays the tuition is worthless. Another part of a research grant goes to the institution, that's the dreaded "indirect costs".
- wahern 9y ago
  The default tax rule in the U.S. is that any benefit you receive, in any form, is earned income and taxable. Layered atop that default rule are a long list of exceptions, which are generally categorized as (1) exemptions and (2) deductions. If you attend a Ph.D program where the advertised tuition is $30k per year, and you get a tuition waiver (or w'ever it's called), the default tax rule says that you still earned income because you received a benefit. The nominal value of that benefit is $30k, therefore the student would need to pay taxes on that $30k. Apparently there's an exemption or deduction that excepts tuition waivers from the default rule, meaning such tuition waivers wouldn't be considered taxable income. As part of the GOP plan to pay for corporate income tax rate cuts, they must discard many kinds of exemptions and deductions to replace lost revenue from the corporate rate cuts. To those who say that this is a shell game[1], note that if it was just a shell game then the change wouldn't have been made. In other words, there's an expectation that discarding this exclusion will generate more revenue. That revenue would directly come from students and/or universities, one way or another. Universities could lower tuition, but one reason for the disparity between nominal tuition and effective tuition is that foreign students disproportionately pay the nominal tuition. Reduce nominal tuition and you reduce the foreign subsidy for domestic students. Not only does the effective price of a graduate education go up, but you're likely to see even more foreign students. Depending on which country you hold citizenship, that's either good for your career prospects or bad for your career prospects. [1] All the news reports make a point of saying that the university "pays" the tuition waiver. It's a distinction without a difference. The student still derives a benefit, and however the university cares to balance its books (e.g. with double-entry accounting) is entirely irrelevant unless there's incredibly esoteric technical requirement to the particular earned income exception. Such esoteric technical requirements are rare since the 1986 reform as the text of modern rules emphasize underlying economic benefits and not accounting practices, as focusing on the latter create more opportunities for gaming the tax code.
  - maxerickson 9y ago
    Getting rid of exemptions and deductions is also "simplification" and "reform". I mean, I agree that the plan is focused on paying for corporate and high end tax cuts, but how do you do tax simplification if special interests are all off limits?
    - nindalf 9y ago
      You don't. The complexity of the tax code isn't a bug, its a feature because people don't want a simple code, they want a simple code _with_ all the exemptions they're likely to use.
    - wahern 9y ago
      Special interests is just code word for other people's deductions. The fact of the matter is that the 1986 tax reform _already_ tremendously simplified the tax code. Much of the cynicism about the modern tax code is latent from the 1986 reform effort, when politicians were drumming up support for very difficult changes. Before 1986 individuals could take deductions on interest payments, for example, just like businesses; after 1986 individuals were only left with the mortgage interest deduction. On the other hand, the corporate code was also tremendously simplified, and like I said did away with esoteric technical requirements rife with loopholes. People were willing to give up their exceptions because corporations lost a lot of theirs, and everything at least felt more equitable. I would argue that the major thrust of the current reform effort is neither simplification nor a quid pro quo. Even with 30 years of accreted deductions, things are incomparable to the pre-1986 system. The major thrust of the current reform effort is simply to shift more of the tax burden from corporate taxes to individual taxes. I don't know why, but I'm sort of ambivalent about all of this, frankly. Perhaps partly because a significant number of of my yearly deductions are business deductions, which I know the GOP won't touch. I think it's dishonest to sell the current reform as simplification, because while some aspects are being simplified, that's neither the underlying motivation nor design. The thrust of the current reform effort is simply to cut corporate rates and replace that lost revenue with revenue from personal income taxes. So, for example, personal exemptions are being folded into the standard deduction and sold as a "simplification". But the only reason for doing that is to hide the fact that such a combined deduction will be less than the current standard deduction+exemptions. Those things are separate for a simple reason--the standard deduction is fixed per household, but the personal exemption is per household member. It could have equally been simplified by getting rid of the standard deduction and increasing personal exemptions, but doing that wouldn't have raised revenue. And that's why it's disingenuous to sell this as simplification--the primary purpose is to generate revenue from personal income taxes to offset reductions in corporate income taxes. There are many reasonable arguments for supporting the GOP tax plan. But people should be wary of rationalizing things in a way that causes them to support or reject the plan even though it fundamentally disagrees with their personal policy preferences. EDIT: Quote from a 2011 review of the 1986 reform: "[The 1986 t]ax reform was not only revenue neutral but also roughly distributionally neutral: This tax reform was not to become an occasion for significantly shifting the distribution of income tax burdens among income classes. So distributional neutrality, along with revenue neutrality, became guiding principles for the legislation." Source: http://www.taxhistory.org/www/features.nsf/Articles/066C3B71D4C8F8CA85257930006459EE?OpenDocument http://www.taxhistory.org/www/features.nsf/Articles/066C3B71...
sliverstorm 9y ago
Why do research grants belong paying admin costs? I thought they were for, you know, conducting research. (Yet apparently most universities already take something like a 50% cut)
- adenadel 9y ago
  I think the original intent is to pay for overhead (lab space, core labs that provide services, office space, etc.) but maybe the administrative bloat has grown to absorb more research money just as it makes up a large portion of total university expenses.

deleted 9y ago

[deleted]

seanmcdirmid 9y ago

Don’t tuition waivers come out of grant overhead anyways? In that case, the amount of a grant going to research wouldn’t change, just divisions in how the overhead is allocated.