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Home :: Archive :: 1997 :: June ::
Tax on Tuition Waivers
The Shakespeare Conference: SHK 8.0683.  Thursday, 19 June 1997.

From:           Joseph Tate <
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 >
Date:           Wednesday, 18 Jun 1997 19:15:57 -0700 (PDT)
Subject:        Tax on Tuition Waivers

Subject: House Cmte Votes 1000% Tax Increase on Grad Students

ALERT
6/13/97
                Tax Scenarios Show Loss of Section 117d
           Could Increase Grad Student Taxes by up to 1000%
                        or more than $500/month
                   SEVEN STUDENT TAX RETURNS BELOW

Washington, DC . . . The House Ways and Means Committee has voted in
favor of a tax bill that includes among its provisions a tax increase on
graduate teachers and researchers of up to 1000% (one thousand
percent).  In a vote strictly on party lines, the Committee approved the
tax proposal originally offered by Chairman Bill Archer (R-TX).  Quick
surveys done by NAGPS have concluded that the tax proposal would
dramatically increase tax burdens on graduate students making less than
$15,000 per year.  Among the various changes to the tax code, the
Chairman's proposal would eliminate Section 117d of the Internal Revenue
code.  Section 117d currently protects from taxation the tuition waivers
often granted by universities to graduate teaching and researchers in
return for teaching up to 40% of the courses on some of the nation's
largest university campuses.

Because the value of tuition waivers often exceeds stipends also paid to
TAs and RAs, counting those waivers as income has the potential to
increase taxes by thousands of dollars per student per year.  Seven
student scenarios (listed below) illustrate how some students will pay
1000% (one thousand percent) more in taxes, or up to more than $500 per
month.

In response, NAGPS (the National Association of Graduate-Professional
Students) is calling upon students, faculty and administrators
throughout the United States to contact members of Congress to protest
this new tax.  Graduate students throughout the US have expressed shock
and surprise at the proposal, with email listserves, web sites and
word-of-mouth quickly alerting students.

"It is sad that a bill being offered to make taxes `more fair' has
instituted a brand new tax on students many of whom earn less than
$15,000 per year," said NAGPS Executive Director Kevin Boyer.  "It is
also a shame that, instead of taking a pro-graduate-education stance in
this bill, the committee chose instead to offer no incentives for
graduate education." NAGPS had anticipated that the tax legislation
would extend a tax deduction for student loan interest, and would offer
a tax incentive to employers who sought to pay for employees' graduate
school.  Both provisions have widespread bipartisan support and were
promised in 1996 Congressional or Presidential campaigns.

Those interested in learning more about the tax bill should visit the
NAGPS web site at http://www.nagps.org/NAGPS/.  NAGPS is also running a
legislative alert email list.  To be placed on the list, send an email
request to 
 This e-mail address is being protected from spambots. You need JavaScript enabled to view it
 

                        #####

        NAGPS Asked:  What if Section 117d were eliminated?
        What could be the effect on your tax bill?
        These students represent some of the effects.

STUDENT #1
Female PhD Student
Asian Languages & Culture
University of Michigan/Ann Arbor

CURRENT LAW SCENARIO
1997 Gross:                                     $ 8,333
Projected 1997 Income Tax:                      $   268
1997 Net Income                                 $ 8,065

NO SECTION 117D SCENARIO
Stipend Income:                                 $ 8,333
Tuition waiver (2 x $9470):                     $18,940
Total Income:                                   $27,273
Projected 1997 Income Tax:                      $ 3,109 (+ 1160%)
Tuition Paid:                                   $18,940
1997 Net Income                                 $5,224 (-$237/mo)

STUDENT #2
Married Couple, filing jointly; Male PhD student at the University of
Alabama/Huntsville, both residing in Huntsville, Alabama. Recently
married.  Husband is student at the University of Alabama/Huntsville.
Wife lost her job in 1996 and has augmented income with painting homes.

CURRENT LAW SCENARIO
1996 Gross:                                     $39,836
1996 Tax:                                       $ 4,405
1996 Net Income                                 $35,431

NO SECTION 117D SCENARIO
Stipend Income:                                 $39,836
Fellowship Income:                              $ 6,000
Total Income:                                   $45,836
Projected 1996 Income Tax:                      $ 5,081 (+ 15%)
Tuition Paid:                                   $ 6,000
1996 Net Income                                 $34,755 (-$56/mo)

STUDENT #3
Female PhD Student
Worcester Polytechnic Institute
Resides in Millbury, Massachusetts

CURRENT LAW SCENARIO
1996 Gross:                                     $14,400
1996 Federal/State Tax:                         $ 2,390
1996 Net Income                                 $12,500

NO SECTION 117D SCENARIO
Stipend Income:                                 $14,400
Tuition Waiver Income:                          $10,680
Total Income:                                   $25,080
Projected 1996 Income Tax:                      $ 3,992 (+67%)
Tuition Paid:                                   $10,680
1996 Net Income                                 $10,488 (-$168/mo)

Student says:  "This would leave me with 10,400, or about 870 per
month.  I pay 450 in health insurance, 600 in car insurance, 400 per
month for rent, and about 100 per month for utilities. This leaves me
about 280 per month for food, clothing, books, entertainment, gas, and
other incidental expenses. I have enough trouble as it is living on the
1000 dollars per month that I currently make after taxes.  I never see
the extra 10,680 dollars that go for my tuition ; they are not in my
pocket.  If this tax bill is passed, I would seriously consider leaving
graduate school, as I do not think that I could afford to live on the
pay that I would take home."

STUDENT #4
Male PhD Student
University of Delaware
Resides in Newark, Delaware

CURRENT LAW SCENARIO
1997 Gross:                                     $ 9,600
1997 Federal/State Tax:                         $   838
1997 Net Income                                 $ 8,762

NO SECTION 117D SCENARIO
Stipend Income:                                 $ 9,600
Tuition Waiver Income:                          $11,250
Total Income:                                   $20,850
Projected 1997 Income Tax:                      $ 2,527 (+201%)
Tuition Paid:                                   $11,250
1996 Net Income                                 $ 7,073 (-$141/mo)

Student says:  "To offset the tax difference ($1,713 at least) for me,
and to compensate for the increased tax withheld from an increased
stipend, the university would have to increase my stipend by more than
20 percent $1,985 bringing it from $9,600 to $11,585." How can they do
this without increasing tuition?

STUDENT #5
Male PhD Student is a Research Assistant on an EPA Grant and studies
at Worcester Polytechnic Institute Resides in Worcester,
Massachusetts.

CURRENT LAW SCENARIO
1996 Gross:                                     $14,000
1996 Federal/State Tax:                         $   549
1996 Net Income                                 $13,451

NO SECTION 117D SCENARIO
Stipend Income:                                 $14,000
Tuition Waiver Income:                          $11,280
Total Income:                                   $25,280
Projected 1996 Income Tax:                      $ 3,797 (+691%)
Tuition Paid:                                   $11,280
1996 Net Income                                 $10,203 (-$270/mo)

Student says:  Each year, I pay $3960 rent, $480 health insurance, $360
bus pass, $240 phone, $600 other utilities, $130 membership in two
professional societies (American Chem. Soc. and Water Environment Fed.),
and $60 to maintain a checking account, for a total of $5830 in expenses
before food. I spend another $300 on books and supplies (grad books are
expensive!). I'm frugal - I can maintain a home and eat for $10/day, or
$3650/yr. That leaves $3671, or $306/month for entertainment, clothing,
Christmas presents for my nieces, prescription medicines,
non-prescription medicines, film developing, and a suit when I
graduate.  But this bill would leave me with $299, or $16.58/month.
Maybe I won't need that suit."

STUDENT #6
Female PhD Student
Involved with Dartmouth College Graduate Student Council, Resides in
Hanover, New Hampshire

CURRENT LAW SCENARIO
1996 Gross:                                     $13,538
1996 Federal/State Tax:                         $ 1,429
1996 Net Income                                 $12,109

NO SECTION 117D SCENARIO
Stipend Income:                                 $13,538
Tuition Waiver Income:                          $29,128
Total Income:                                   $42,665
Projected 1996 Income Tax:                      $ 7,709 (+539%)
Tuition Paid:                                   $29,128
1996 Net Income                                 $ 5,828 (-$523/mo)

Student says:  "Therefore, Dartmouth graduate students would have paid
$6280 more in taxes, which would have made our income $7258 for the year
(46% decrease).  It would not be possible to live in the area on that
wage. For 1997, the tuition is now $30,528.  I hope this helps!  I sent
the word out  to all Arts and Sciences graduate students at Dartmouth
yesterday (291 of us we're a small grad institution) and all who have
responded are very upset. It just would not be possible for any of us to
pursue a career in research and education if this tax bill passes. As
graduate students, we do not expect high incomes in our chosen fields
and, to be here now, we are sacrificing health benefits, pension plans,
and high incomes during our 20s and 30s.  All of this we do to become
educators and educated researchers for the United States.  Shouldn't
theybe encouraging us??

STUDENT #7
Married Couple
Wife is a student at George Washington University. Husband employed by
federal government.  Resides in Alexandra, Virginia

CURRENT LAW SCENARIO
1996 Gross:                                     $50,528
1996 Federal/State Tax:                         $ 5,950
1996 Net Income                                 $44,578

NO SECTION 117D SCENARIO
Stipend Income:                                 $50,528
Tuition Waiver Income:                          $ 9,050
Total Income:                                   $59,578
Projected 1996 Income Tax:                      $ 8,164 (+37%)
Tuition Paid:                                   $ 9,050
1996 Net Income                                 $42,364 (-$185/mo)

====================================================================
The National Association of Graduate - Professional Students
825 Green Bay Road, Suite 270    PHONE: 847-256-1562
Wilmette, IL 60091                FAX:  847-256-8954
Toll Free 1-888-88-NAGPS * Email to: 
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