Pro-tax university professors find a tax that they don’t like

A lot of my Facebook friends are university professors. As such they get, as part of their compensation, free tuition for their children (or, oftentimes, partial payment for tuition if they send their kids to other colleges). Some of them have graduate students, who get their fictitious tuition paid when on research or teaching assistantships.

All of these folks publicly supported Hillary Clinton prior to the election, denounced the Trumpenfuhrer’s hints about shrinking the government’s role in our society, and generally advocate for higher tax rates so as to enable the government to fulfill all of our collective dreams.

How are they reacting to the latest proposed tax law changes? With desperate lobbying efforts to preserve their own tax exemptions. Examples:

To my California friends and family, especially those who have children to educate: Republican representatives in these CA districts near you have BIG influence over *which version* of the tax bill—including whether it taxes things like tuition remission, etc.—eventually gets approved. It’s not an exaggeration to say the future of American higher education is at stake.

A crucial decision remains to be made between the House and Senate versions of the GOP tax bill. So here’s a plea to everyone who cares about the future of American universities: not only must we CALL OUR REPS, we must urge our friends and family to do so as well! I’m calling not just my own reps and senators but others’ too, identifying myself as a professor and trying to convey my sense of urgency about this bill.

[mass email to faculty at University of Chicago] Doubtless all of you are thinking about the potential effects of the Republican tax bill, which appears bent on directly attacking higher and lower education in the United States. …  The bill passed by the Senate *does not* include the grad student tuition waiver tax proposed by the House bill. …

For students like Mollie Marr, pursuing her M.D. and her Ph.D. in behavioral neuroscience in the OHSU School of Medicine, losing the tax waiver could mean dropping out of OHSU. Paying the estimated tax on top of her non-deferrable undergraduate student loans would leave her about $500 a month to live on. … students, staff and faculty to share their personal stories and perspectives about the impact of losing this tax waiver … Call and email your U.S. representatives and senators.  [official OHSU news release]

If universities actually are delivering something of value to professors’ children via tuition waivers, shouldn’t these good folks want to pay tax on that value? A core principle of U.S. income tax is that you pay tax on the fair market value of stuff that you receive in exchange for work. Also, if universities are delivering something of value to graduate students in exchange for work, why should a Walmart cashier have to work extra hours to make up for the tax not collected? (see Ugliest part of the Republican tax plan: What if universities were forced to calculate the value of a graduate education? for an exploration of what the imputed value of this tuition waiver should be, though)

These same folks have spent years on Facebook arguing for the government to collect more in taxes. Now they’ve found a tax that they don’t like!

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11 Comments »

  1. toucan sam

    December 5, 2017 @ 1:12 pm

    1

    This is great Phil!

  2. Neal

    December 5, 2017 @ 3:02 pm

    2

    @philg: Do you think that taxing tuition waivers in order to lower corporate tax rates provides an overall benefit to society and the economy? If so, please explain the mechanisms by which those benefits are generated.

  3. Tom

    December 5, 2017 @ 3:43 pm

    3

    More jobs, fewer grad students (if that actually happens). It seems good. As we well know, the postgraduate world is severely overpopulated.

  4. presidentpicker

    December 5, 2017 @ 3:47 pm

    4

    the grad program at UMD spammed all students and told them about this new “fake tuition” tax and how we should all support whatever the other side is, and think of the children, and poor, and all that usual cliche stuff. The reality though is that university higher ups are probably worried about their personal well being somehow being affected…

  5. philg

    December 5, 2017 @ 9:12 pm

    5

    Neal: I don’t think that the tuition tax issue is related to the corporate tax issue, though they happen to be in the same bill.

    The corporate tax rate cut is, in my opinion, likely to be beneficial because it will enable the U.S. to compete with other countries as a place for a business to be headquartered. In a global economy we can’t have 2-3X the corporate tax rates of alternative business locations.

    The tuition tax panic? If professors are getting an in-kind benefit for their children I think that they should be taxed on that. It benefits society when citizens are treated equally. (I also think that health insurance paid by employers should be taxed.) The grad student fictitious tuition thing is just another illustration of how we Americans have created systems more complex than we are capable of understanding or operating. Somehow it will get sorted out without NSF and DoD money being diverted back into the Treasury.

  6. Anonymous

    December 6, 2017 @ 1:00 am

    6

    One new tax they might like: federal property tax to provide free electric cars to everyone, in the usual priority order. Will help with meeting Paris agreement requirements very greatly in theory, but nobody actually has to pay and can just blame it on the Trump – they certainly will be willing to pay this high tax but Trump will never support it because he owns a lot of property.

  7. Tom

    December 6, 2017 @ 4:25 am

    7

    “One new tax they might like: federal property tax to provide free electric cars to everyone, in the usual priority order. Will help with meeting Paris agreement ”

    I thought America wasn’t part of that agreement? However, a Musk Tax will even so be welcomed by car manufacturers.

  8. Tom

    December 6, 2017 @ 4:26 am

    8

    If only tuition weren’t so extremely expensive …

  9. Neal

    December 6, 2017 @ 1:39 pm

    9

    “Somehow it will get sorted out without NSF and DoD money being diverted back into the Treasury.”

    In other words, I’m going to assume (based on no specific evidence) that some parts of the law won’t actually be implemented.

  10. philg

    December 6, 2017 @ 1:52 pm

    10

    Neal: Certainly this assumption is not required. As the referenced Forbes article shows, universities can cut the tuition tax liability of grad students to $0 by awarding a “scholarship”.

    Even if the universities are too lazy to edit any documents to add the word “scholarship”, what part of the law requires that the university’s absurd full tuition rack rates be used for graduate student tax purposes?

    If you do some work for me and I give you a watercolor painting in return and say “This original watercolor by Philip Greenspun has a value of $70,000,” is it obvious that you owe the IRS tax on $70,000 of income? If nobody has ever actually paid $70,000 for one of my watercolors, how is it relevant what value I, the self-proclaimed great artist, put on it?

  11. Realist

    December 7, 2017 @ 12:21 am

    11

    “Mollie Marr, pursuing her M.D. and her Ph.D. in behavioral neuroscience in the OHSU School of Medicine, losing the tax waiver could mean dropping out of OHSU”

    Isn’t someone going to point out how much money Mollie could make by banging an MD instead of getting an MD?

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