Statement on Grad Tax
I applaud the federal effort to create meaningful tax reform for American citizens. I encourage you to continue with the protections for those students benefiting from the Lifetime Learning and Hope tax credits, the American Opportunity tax credit, Coverdell Education Savings Accounts, graduate assistant tuition waivers, educational assistance payments from employers, U.S. savings bond redemptions for higher education expenses, and other qualified deductions for education expenses.
I do wish to caution, however, about the devastating effects treating graduate student waivers as taxable income will have for our current 1,581 University of Arkansas graduate students receiving a tuition waiver, future UA students and the University of Arkansas as the land-grant flagship institution for our State of Arkansas.
Without being hyperbolic, a tax on our graduate students will place graduate education out of the reach of many of our students — these are students who are working to assist faculty with their research endeavors as well as a valuable teaching role for the education of undergraduate students. In short, this tax will make us uncompetitive for graduate students given the anticipated way universities with more resources than us will pivot to address this issue.
Many universities will bear the brunt of this tax by increasing tuition to offset the impact and maintain an ability to recruit graduate students. At the University of Arkansas, increasing tuition will hurt those who need it most and create a dynamic where only the very wealthy will be able to afford graduate education, which I don't believe is anyone's intention. On our campus, some $5.3 million in tax burden will be placed squarely on the shoulders of students, who will be forced to use up to one-third of their stipends to pay their tax bills.
In practical terms, for example, the $15,000 an out-of-state UA graduate student might typically earn on a yearly basis becomes $43,000 for tax purposes due to the waiver on the $28,000 tuition that student typically receives based on our cost of attendance. Even with increased standard deductions this yields a substantial tax increase over what graduate students pay under the current law. Needless to say, a tax increase of this magnitude would be devastating for graduate students at the University of Arkansas. Many current graduate students would not be able to take a loss of this magnitude to their already modest stipends, which we are desperately trying to raise already and are intended to cover their basic expenses such as food and lodging.