Proposed tax bills may affect Brandeis

December 1, 2017

In a Nov. 17 campus-wide email, provost Lisa Lynch urged members of the Brandeis community to contact their congressional representatives to express their views regarding tax proposals which may have a “damaging impact” on universities.

The email came the day after the House of Representatives passed a tax-reform bill. On Tuesday, a similar bill passed the Senate budget committee and is making its way to a vote.

Both the House and the Senate bill would change the ways in which universities and graduate students are taxed.

The Nov. 17 email noted that the Brandeis administration has received emails and notes which express “great concern about the negative impact these legislative proposals would have on Brandeis and Brandeis students.” Lynch expressed concern over the tax bill “potentially increasing an individual student’s income tax by thousands of dollars.”

According to George Hall, a professor of economics at Brandeis, what would affect students the most is the part of the House bill which treats tuition waivers for graduate students as taxable income.

Universities often have tuition waivers when they employ a graduate student who may teach or conduct research in addition to taking classes. Tuition waivers give graduate students money off tuition in return for this work. The House bill wants to tax these tuition deductions as if they were income.

But, according to Hall, tuition waivers are not income, per se. He compared the difference between the list price of graduate school and what a graduate student might actually pay with a tuition waiver to the difference between the list price of a car and what someone actually pays for a car. “Just because you pay a different price, don’t call that difference income,” Hall said.

In addition to considering tuition waivers as income, the House bill would eliminate the tax deductibility of student loan interest, reduce the American Opportunity Tax Credit, eliminate the Lifetime Learning Credit and increase the cost that schools like Brandeis would have to undertake to borrow funds for infrastructure and maintenance on campus, according to the email from Lynch.

A tax credit is a credit that qualified individuals can subtract from the taxes they owe.

Dean of the Graduate School of Arts and Sciences Eric Chasalow told The Brandeis Hoot that the tax bill, if it became law, “would make affording an education even more challenging than it currently is.”

Chasalow expressed hope that the provisions affecting graduate students will not make it through the legislative processes, stating that if they did they would “do great harm to the entire American university community.”

Under both the Senate and House bill, many universities would have to pay a tax on the net-investment income generated by college and university endowments. The provision applies to universities that have endowments worth at least $250,000 per student. Brandeis’ endowment breaks down to $154,000 per student, said Stew Uretsky, the Executive Vice President for Finance and Administration, at a Nov. 29 open meeting on Brandeis’ finances.

Lynch noted that the Brandeis endowment as it stands falls below the proposed threshold for the bill but said that this tax “may become a binding constraint for our university in the future.”

In her email, Lynch said that Brandeis is working with the Association of American Universities (AAU) and other university groups who are speaking out against the potential these bills have to harm institutes of higher education.

The AAU has released statements on both the House and Senate proposals.

The statement on the House bill argues that by making “higher education less affordable and less accessible to middle- and low-income Americans” the bill “undermines the very workforce Congress seeks to support.”

The AAU statement on the Senate proposal suggests that by eliminating the state and local tax deduction, Congress would “discourage state investment in public colleges and universities.”

The final version of the tax bill, if a bill passes through the Senate, would have to reckon with any differences between two bills and it remains to be seen what provisions would be made into law.

In an email to The Hoot, Lynch noted that the impact of any tax changes will vary on an individual basis. “Taxes paid will vary person by person and family by and for international students on the basis of bilateral tax treaties,” Lynch said.

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