Tagged: taxes

Why Rob Peter to Pay Peter?

A Modest Proposal for Saving Graduate Higher Education in the U.S.

Every Christmas while I was growing up, my dad had a gift giving ritual with his parents. They gave each other cash. I became convinced that this was often the same amount. From meager means Grandma and Grandpa scraped together a modest living punctuated by moments of extravagance, like their trips to Vegas. The cash swap was a form of empowerment: here is some money that you didn’t have to spend on whatever you want. It was a symbol of financial freedom. But, in terms of the actual balance sheets, it changed nothing.

I am not an accountant. I do not purport to understand most of the details of the tax plan that Congress has in the works. I do understand how it would make tuition stipends taxable, devastating the overwhelming majority of Ph.D. programs, as well as many M.A. programs.  The humanities and social sciences would be hit hardest. Whether as the direct or indirect result of impoverishing their graduate students more so than they already are (this is a thing), many graduate programs would close. (M.D., J.D., M.B.A., and other professional programs would be generally unaffected.)

The trouble is that, at present, programs charge students tuition (on paper) and then offer them a soon-to-be-taxed tuition waiver (often on the same piece of paper). Instead, affected graduate programs should reduce the tuition charged to students to zero—not net zero but actual zero—so that tuition waivers and taxes on them would be similarly non-existent. This would, of course, involve finding new ways of doing internal accounting for program costs and perhaps making admissions policies even more selective, but this could be done. Otherwise, it’s like Peter robbing Peter to pay Peter. Couldn’t he just leave his money where it is?