Tax Plans, Graduate Students, and Bearing the Burden

It’s also likely to make life more economically difficult for graduate students in other ways:

The House bill eliminates several tax deductions and credits to pay for tax cuts and to simplify the tax code. It eliminates the student loan interest deduction as well as the tax exclusion for tuition reimbursement received from an employer. It scraps the Lifetime Opportunity Credit that benefits students enrolled in higher education for more than five years, but expands the American Opportunity Credit by one year.

“The current law education tax benefits are so complicated that they are ineffective because many taxpayers cannot determine the tax benefits for which they are eligible,” a summary of the bill said.

The bill also nearly doubles the standard deduction, which could make up for the loss of some other deductions. It raises today’s standard deduction for singles to $12,200 from $6,350.

But it’s unlikely the new standard deduction will offset the loss of tax-free tuition waivers for graduate students, which often exceed that amount. The bill also eliminates the $4,050 personal exemption you’re allowed to claim today for yourself.

Shih would see his taxable income raise to about $44,800 from $14,600 after taking those three changes into consideration.

“I think this tax change would discourage a lot of students,” he said. (CNN)

As one friend’s father (an accountant) put it: someone has to foot the bill. Put otherwise, someone has to bear the burden. The question is why it should be graduate students (on average not exactly a wealthy group—our career is often merely a way for disadvantaged students to pursue their passions)? The big winners, as per most analyses, are the wealthy:

Several elements of the tax bills would disproportionately benefit wealthy taxpayers.

These include the elimination of the alternative minimum tax, which requires that taxpayers with many deductions pay at least a minimum amount of taxes; the creation of lower rates for “pass-through” income, which covers business income that is taxed on a business owner’s personal filing; and more generous exemptions (in the Senate bill) or outright elimination (in the House bill) of the estate tax.

According to the Tax Policy Center analysis of the House bill, the second-highest quintile of taxpayers would see a gain of $1,610 — well above any of the lowest three quintiles — while the highest 20 percent of households would get an even bigger tax cut of $4,860 in 2018. That works out to about 1.9 percent of their income — the highest of any quintile.

The top 1 percent would do even better, saving $37,100 in 2018, or 2.4 percent of their income. And the top one-tenth of a percent of the income spectrum would see a cut of $174,620, or 2.5 percent of their income. (Politifact)

This is not to say that other brackets won’t see slight savings as well; they just can’t compare to what higher-earners will see. Graduate students, along with teachers and others, will be picking up the slack. Unless one is a true believer (in the strongest sense) in trickle-down economics, it’s difficult to know why it is that corporate interests should receive large breaks while low- and middle-earners get a little help (in some cases help erased by other provisions in the bill).

This is not the place for me to challenge those who really believe in the effects of trickle down (I think there are plenty of reasons not to believe it works; my own articles on politics ought to clarify my own position to some degree). All I can hope to do is to highlight one of the ways in which economic mobility may be limited by the bill; one of the ways in which scientific innovation may fall by the wayside.

But anyone who is familiar with this blog likely knows that “economic mobility” and “scientific innovation” are not my primary concerns. I mention these only to note that, even for pragmatists, this bill (in at least one version) makes little sense. For those who think like I do, who think less in terms of growth and more in terms of justice, it’s just another example of how a neoliberal drive for growth, allied in its own way with a desire to simplify things for people, can wreak havoc and lead the diminished to bear a greater burden.

On a last note, I must appeal to my readers as (presumably) Christians. I recognize that I am not “poor” (though my background is certainly not a wealthy one); I recognize that someone must always foot the bill. I have no illusions about the harsh economic realities that drive tax-code changes. I would just ask you to keep in mind the words of the Book of Proverbs, because even if it isn’t graduate students and teachers bearing the burden, we ought to think long and hard about who benefits and who loses. In short, we ought to consider, everywhere and always, what is just:

Open your mouth in behalf of the mute,
and for the rights of the destitute;
Open your mouth, judge justly,
defend the needy and the poor!
(Proverbs 31:8-9)