Tax Reforms Hits Grads

Getting through graduate school is challenging, but the process may get even harder if the tax plans being debated by Senate and House Republicans come to pass.

PhD students dedicate five (or more) years of their lives to studying and conducting original research, with the hopes of contributing new knowledge to help advance a field they are deeply passionate about.

Many of my friends in graduate school at UCSF and other institutions worry that the success of the proposed tax plan would ultimately force them to drop out of graduate school.

This worry is not unfounded, but there is some misinformation circulating amongst Facebook feeds. Thus, I am going to use my financial situation to help make sense of how this tax reform plan could impact graduate students.

While graduate school lets me scratch my itching curiosity about the inner-workings of the human body, it isn’t very lucrative.

My PhD is a full-time job (with plenty of overtime), and my primary obligation is to the university, meaning taking on a second job is not really an option.

The only way I and other PhD students survive without incurring significant debt is through a small stipend and tuition waivers.

I receive this tuition waiver in exchange for my work as a teacher and/or research assistant, but this is money I never really see. Rather, UCSF just pays itself a tuition fee on my behalf.

Currently, under the Qualified Scholarships section (117) of the U.S. tax code, this money is not considered part of my income and doesn’t incur a tax liability. The GOP tax reform plan could change this, however, meaning I’ll be paying taxes on additional $18,000 that I never actually receive.

Under the proposed GOP tax plan there will be four federal income tax brackets: 12% for income between $0 and $45,000; 25% for income between $45,001 and $200,000; 35% for income between $200,001 and $500,000; and 39.6% for income over $500,000.

Paying taxes on my waived tuition fee means my $37,000 income will increase to $55,000. This would appear to move me to the 25% bracket, but this does not mean I will be paying $13,750 in federal taxes. Rather, the first $45,000 of my income is taxed at 12% and the next $10,000 ($55,000 minus the $45,000) is taxed at 25%. So now I owe the federal government $7,900 in taxes.

However, under the GOP tax plan there is a standard deduction of $12,000.

Taking this deduction into account, my taxable income comes out to $43,000. Using the Trump Tax Calculator from Market Watch, I determined that under the new plan my effective tax rate would be 9% or a total of $5,160 for federal taxes.

A $37,000 income equates to state taxes of $891, but if taxed on my stipend and tuition this amount would increase to $2,140.

Thus, after all is said and done I’m left with about $29,700 a year or $2,475 a month.

That seems reasonable for me, except I live in San Francisco where the median listing price for single room in a shared household on Craigslist is about $1,350. This leaves me with just over $1,000 a month to spend on various bills, groceries, public transportation, and miscellania.

This is a tight budget, and I wouldn’t be able to put much into savings (so here’s hoping no unexpected expenses come my way).

I could find a way to make this work but for many others, this monthly budget would be unworkable.

For those with a partner, children, or other family members who are dependent on their income, a graduate education will be impossible.

For those with special health-related expenses or other expensive but necessary financial obligations, a graduate education will be impossible.

For those with a private institution where tuition is more than double that of UCSF’s California resident tuition, a graduate education will be impossible.

And what about first year UCSF graduate students who would be taxed on the California nonresident tuition of $33,000? According to my calculations, after taxes and rent, first year students could be left with as little as $720 a month.

In addition to hurting students already in graduate programs, the extra financial burden imposed by the GOP Tax Reform could lead to fewer students entering graduate programs.

Over the years we have been trying to improve access to the fields of Science, Technology, Engineering, and Mathematics (STEM), and careers in many of these fields require graduate training.

Thus, loss of the tuition waiver means loss of access to STEM education, which means less individuals trained in STEM, which means fewer people entering STEM careers.

This will not promote a more vibrant and innovative American economy, this will not help make America great, and this is only one of the many problems with the tax reform plan.

I encourage you to read more. Then call your senators and representatives from your home state and explain to them how this plan is failing to serve you and our country.