US Republicans are trying to pass a bill called the Tax Cuts and Jobs Act, which would overhaul the tax system. On November 16th, the bill was passed by the House of Representatives. The main focus has been on its large tax cuts to corporations as well as its price tag of $1.4 trillion over the next ten years. However, if it is passed, it would have another major effect: to dramatically increase the amount of taxes that PhD students pay. If passed, the bill could have immediate consequences on the role of the US as a scientific leader.
Even now, following a PhD is not a huge money-maker. Although you require advanced specialization, the pay is more along the lines of a shampooer and a fry cook. According to the US Department of Education’s most recent data (from 2011-2012), more than half of graduate students make do on less than US $20,000 a year. Additionally, PhD students often work long hours and even on weekends, and, in the US, usually, have to work in the lab additionally to earn their salary. In order to offer their graduate students a salary that they can live off of, most universities waive their tuition fees. So even if the tuition is theoretically $20,000, the student wouldn’t have to pay that amount. PhD students never receive the tuition money, the amount is more of a formality.
This new tax plan would count tuition waivers as a taxable income, meaning that graduate students now fall into a much high tax bracket and need to pay a higher percentage of taxes. If a grad student earns $20,000 and gets $20,000 in tuition waived, then he or she is taxed for a $40,000 income. In the most extreme cases, this could lead to a 50% reduction in total salary, though the average salary would be $2,000-3,000 lower than currently.
STEM fields would be the most affected by this new law, as 60% of students who get tuition exemptions come froscience-related fields. Social sciences, humanities, and health are also affected. To add insult to injury, the bill also consolidates or eliminates tax credits on student loans for undergraduate and graduate students. In total, at least 172,000 students would be affected.
Pursuing a graduate degree does not guarantee a good job, and those wanting to pursue an academic position have to deal with fierce competition for few positions and low science funding. US students already accumulate debt after completing a Bachelor’s degree, pursuing graduate school would only add to this amount. This bill will have immediate effects if passed and could be a deterrent for many students. It is unsure how this would affect PhD enrollment in the next years, though universities that have higher tuition may be the most affected. It could drive students to other countries or to better-paying jobs, or discourage foreign students.
Democrats and Republicans have agreed that they want to improve access to STEM education because it would help the economy. However, this new tax bill sends the opposite message and gives the impression that PhD students don’t have support. The message itself is important even if people still continue to do their PhDs in the USA. It says that the government would rather cut company and estate taxes for the rich, while making it more difficult for the just-getting-by PhD students who are the future of research and innovation.
It is up to the Senate now to decide where their priorities lie. They are set to vote on the bill next week.