Higher education, though, seems to be the target of an unusually large number of revenue-raising provisions. The House bill does away with the deduction for student-loan interest, trims tax credits available to students and parents, taxes graduate students on the value of tuition waivers and taxes workers for employer-paid tuition.
Both the House and Senate also are proposing a new tax on some universities’ endowment income. In addition, colleges and other nonprofit institutions worry that a higher standard deduction will leave Americans with less incentive to make charitable donations.
It looks like a multipronged attack on what some Republicans view as an academic elite. According to a survey by the Pew Centers this summer, 58 percent of Republicans believe universities affect the country negatively, while just 36 percent say the effect is positive.
Among Democrats, 72 percent see colleges having a positive effect, while just 19 percent view them negatively. The divide is striking, but we can’t afford to have higher education become a partisan battleground.
“It’s hard to understand why people would be proposing this,” says Fred Pestello, president of St. Louis University. “It runs counter to everything that has formed the basis of the country’s economic vitality.”
University leaders are both puzzled and alarmed by the proposal to tax graduate students on the value of the tuition they don’t have to pay. Tuition waivers are granted to students who perform teaching or research duties in addition to their studies, and are most prevalent in scientific and technical fields.
At Washington University, tuition is about $50,000 a year. A research assistant living on a stipend of perhaps $30,000 a year would suddenly have taxable income of $80,000.
The huge tax increase would either keep some students from pursuing graduate degrees, force universities to pay them more, or both. “It would be devastating to these students,” says Mark Wrighton, chancellor of Washington University, “and this kind of impact would be devastating to the research enterprise.”
Nearly 145,000 graduate students receive such tuition waivers. The job-rating website Glassdoor says the average research assistant earns less than $30,000 a year.
They hardly constitute a wealthy elite. Nor do the 13 million taxpayers who deduct student-loan interest or the 2.5 million who claim the lifetime learning credit, which was designed to benefit nontraditional students.
Even the proposed 1.4 percent excise tax on investment income, which targets 70 or so schools with large endowments, would have unintended consequences.
Wrighton says Washington University, which would be hit by the tax, uses its endowment to provide aid to low-income students. “We’ve been trying very hard to help as many students as we can, and having an excise tax on endowment returns will slow the rate of progress,” he said. “It would have an impact on the available resources for financial aid.”
Both Wrighton and Pestello have written letters sharing their concerns with Missouri’s senators and members of Congress. Christian Basi, spokesman for the University of Missouri system, said the state universities endorse similar letters written by higher-education groups.
The educators are hopeful that Republicans, though eager to pass a tax cut by Christmas, will slow down and think about the harm they might be doing.
Our universities are, after all, the envy of the world, and they produce the human capital on which our economy runs. Anything that damages them also damages America’s future.