Proposed new tax code could cut scholarships, increase grad student costs

House Bill 1 — the Tax Cuts and Jobs Act — proposed on Nov. 2 by Republicans in the U.S. House of Representatives includes several provisions that could hurt universities and their students.

Mitch Kokai, senior political analyst at the conservative-leaning John Locke Foundation, said while the proposed act is intended to benefit middle-income taxpayers, higher-income earners are more likely to feel larger dollar-for-dollar benefits. 

Some of the key components include collapsing the number of individual income tax brackets from seven to four, increasing the minimum income levels for each bracket, reducing the corporate tax rate to 20 percent and limiting deductions and exemptions, he said.

“People who were in the middle range of tax earnings are going to end up seeing a proportionally higher benefit than high-income earners, even though high-income earners are going to get larger dollar-figure savings,” Kokai said. 

Kokai said critics fear some of these provisions will increase taxes for universities and students, as well as discourage donations to universities. He said the proposal would limit the amount of donations that would be tax-deductible, disincentivizing donors and reducing resources for universities.  

“Those who are supporting the proposal are trying to eliminate some of the complexity of the tax code," Kokai said. "But I think this is one area in which they’ll probably end up deferring to the status quo rather than moving forward with a fight over donations to university groups.”

Kathleen Thomas, a UNC-Chapel Hill law professor, said certain provisions of the bill could increase the costs of going to college. One of these provisions is an excise tax on endowments received by private institutions, she said.

“Universities use these endowments to give scholarships,” Thomas said. “So if we tax them there will be less money to be put toward student education.”

Thomas said it’s highly unlikely the bill will pass in its current state, but the question of which provisions will stay and which will go still stands.

Katie Stember, a UNC Ph.D. student and chief of external relations and advocacy at The Graduate and Professional Student Federation, said the federation's main concern is the repeal of section 117(d) — which would tax tuition waivers for graduate students who are teaching and research assistants — and the removal of write-offs on student loans.

“A lot of students are already struggling to live on the stipends that we get, based on the large student fees we’re required to pay out, the cost of living in this area and the fact that a lot of graduate and professional students have families,” Stember said. “We already know that there are a ton of students struggling at this university and this will make it even harder for those people to get by.”

Madelyn Percy, a UNC-CH Ph.D. student and president of the GPSF, said international students are at an even bigger disadvantage. If international graduate and professional students are here on an F-1 visa, they aren’t allowed to supplement their stipends with income from extra jobs, she said. 

Because the Senate will also propose a new tax bill, Percy said it is unlikely the House bill will pass in its current form. After the failure of the American Health Care Act of 2017, House Republicans are determined to get something done, but the Senate will most likely move slower and be more deliberate with the process, she said.

“President Trump has stated that he wants to give Americans a big, beautiful Christmas present of a tax break, so the executive branch of the government wants this done by Dec. 25,” Percy said. “I think that with the reconciliation process with the Senate proposal, this deadline is very unlikely.”

In general, Stember and Percy are set on spreading the word about the bill and educating their peers — graduate, professional and undergraduate students alike — about its negative provisions.

“UNC is pretty unique in that we have a lot of graduate and professional students that are truly engaged in how state and federal policy will affect them,” Percy said. “The GPSF is able to take a leadership role to try and make sure that all of our graduate and professional students across the country are aware of how these changes might affect them.”

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