A Note to the GOP: Tuition Waivers Aren’t Income

Photo by Josue Mendivil

Graduate students are worried; they’re angry; all around the country graduate students are assembling to protest a provision in the GOP tax bill that would count tuition waivers they receive in exchange for research and teaching assistance as income and tax them accordingly.

A lot has been written objecting to and defending this provision in the bill: it’s been pointed out many times that this could price many graduate students out of their studies, causing not only a personal loss for them and a loss of labor for universities, but a cultural loss for the country; it has also been pointed out that universities could stop exploiting tuition waivers for these students as good PR and just not require payment at all for these particular students (currently the university either pays itself in an internal transaction or takes a portion of the balance from the students’ research grants).

One point that has not been made much seems to me to be the most fundamental: tuition waivers are not income

One point that has not been made much seems to me to be the most fundamental: tuition waivers are not income, defined as Revenues-Expenses, they’re benefits. Many, if not most, employers offer benefits in some form or other to their employees: health insurance, retirement pans, child care, transportation, even coffee in the break room is an employer provided benefit. None of those are taxed as income by the IRS because none of those are income: the engineer never receives the money to pay for their employee dental plan, or for the flight to that conference in New York, of for the coffee they drink in the office, they simply receive the service as an incentive to keep working for GM, and keep working well, instead of moving to Ford, just like a Yale PhD student never actually receives the money to pay their tuition, it is simply waived as an incentive for them not to go to Harvard instead, or maybe a less expensive state school, and to continue offering services fundamental to the function of any university; whatever gimmicky accounting that goes on behind the scenes to pay Delta for the flight is irrelevant to the engineer, just like whatever Yale does to pay itself is hardly the responsibility of the PhD student.

Some employer benefits can and should be taxed, just not as income. If my employer gives me a house (unrealistic example but just roll with it) I shouldn’t have to pay the value of the house as income, but I should have to pay property tax on said house, added to any other taxes required to transfer ownership of the place. I suppose you could extend this logic to tuition waivers and create a new type of tax, like a scholarship tax, but good luck getting reelected to congress if you try to bill your constituents for their children’s Pell Grants.

Do we really want to discourage education?

If discussion of benefits and income is too boring for you to object to this provision in the tax bill, I’ll leave you with this: a lot of what is considered taxable or not is based on a desire to encourage or discourage certain types of behavior; we offer a Mortgage Interest Deduction to encourage people to buy a home, we make charitable donations tax-deductible, we offer a Child Tax Credit for families. Whether this is right or wrong is a different discussion, what’s important is that this is the way it is. Do we really want to discourage education?

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