How the House Tax Cuts and Jobs Act Could Affect Grad Students
Days before the House of Representatives voted to pass the House Tax Cuts and Jobs Act on the morning of Thursday, November 16, budget experts at the Wharton School at the University of Pennsylvania broke down the proposed bill, discussing its broad potential impact.
The breakdown, per the Wharton Budget Model, focused on three principle findings:
- “This brief reports Penn Wharton Budget Model’s (PWBM) dynamic analysis of The House Tax Cuts and Jobs Act (TCJA), as amended and reported out by the Ways and Means Committee on November 9, 2017.”
- “After including the tax bill’s effects on economic growth, TCJA is projected to reduce revenues between $1.5 trillion and $1.7 trillion. Debt rises by about $2.0 trillion over the same period. Looking beyond the 10-year budget window, by 2040, revenue falls between $3.6 trillion and $4.4 trillion while debt increases by $6.4 to $6.9 trillion.”
- “In 2027, GDP is between 0.4 percent and 0.9 percent higher than with no tax changes. By 2040, the difference between GDP under the House tax bill and current policy is between 0.0 percent and 0.8 percent, due to larger debt.”
The research focused on broader implications, rather than zeroing in on how the bill potentially effects different socioeconomic classes. In conclusion, the research “projects that The House Tax Cuts and Jobs Act reduces federal tax revenue in both the short and long-run relative to current policy. In the near term, there is a small boost to GDP, but that increase diminishes over time.”
Brian Naylor at NPR notes that the bill was passed mostly on bipartisan terms, with Republicans in the U.S. House of Representatives largely pushing it through to the Senate without much push-back. “The vote was almost along party lines, with no Democrats voting in support of the bill and some GOP defections over provisions in the measure that would eliminate important tax deductions taken by constituents in some high tax states,” he writes.
The bill is less likely to pass in the Senate as it did in the House, according to reports from the New York Times. If it were to, however, the new legislation would directly affect graduate students across the board—including MBA students.
Section 117(d) of the bill, which can read here, indicates that all graduate students that receive any kind of tuition waiver will still have to pay taxes on the removed costs. For MBA students at schools like the Tepper School of Business at Carnegie Mellon University, this could mean a year-end cost increase of at least 25 percent, if not more. For students in Ph.D. programs, which often give tuition waivers to help bring in valuable research, the costs can be significantly higher, according to CNBC.
“This makes graduate school unattainable for anybody not already very well off,” 24-year-old grad student Kelly Balmes told NPR. “It also creates a diversity problem, which graduate STEM programs already have.”
