November 16, 2017

What is a PhD student and how does the proposed Tax Cuts and Jobs Act apply

I chose to pursue a Ph.D. in Transportation Engineering at the University of Washington in Seattle for a few reasons:

• I want to teach. I found a passion for it as a tutor and teaching assistant during my undergrad and I want to learn how to educate the next generation(s) of engineers.
• I want to improve how people get around. We all need transportation to go about our daily lives and, with so much happening in the world, the question of how do we make sure people can move around freely and easily is becoming more complex and difficult to answer. I want to be a part of that answer.

Before becoming a grad student, I didn’t fully understand what it meant to pursue a Ph.D. Now that I am a Ph.D. student, when I tell people what I do, most people don’t seem to understand what it means either and I end up with the equivalent of this reaction:

In light of the recently proposed tax plan, I wanted to explain what I do as a Ph.D. student so that people can better understand what we do on a daily basis and how this plan will impact us and higher education in the US in general.

My first year involved a lot of class work to make sure I had the skills to move forward; I learned a lot about research in my field (i.e. what do we know, what do we NOT know, and what constitutes bad research), how to define a question in a way that could be answered, and various technical tools (such as programing skills, database management, and statistical models) that can be used to answer those questions. Since then, however, my role has shifted to that of an employee more than a student. Depending on my funding source for a given quarter, I will have one of three types of jobs:

• I work for a professor as a research assistant (RA). This means that I am given tasks that must be completed by a deadline – admittedly, tasks are often loosely defined and deadlines are fewer and far between than you might see in the corporate world, but they exist and there are penalties for missing them.
• I work for a professor as a teaching assistant (TA). Depending on the professor and the course, my responsibilities in this role can range from just grading papers and holding office hours to developing course materials such as problem sets, grading rubrics, and presentations for the class. For me, this is much like an apprenticeship to learn how to be an educator.
• I work for a fellowship. Various organizations (within and outside of the university) support graduate students in this way – a fellowship is much closer to a grant than a scholarship because it has strings attached. An organization has a question and they pay me to answer it. Most often, the questions are extremely broad (like “how do we move people more effectively through a city”) and the idea of a fellowship is to provide me with the support I need to be creative and try to answer that question.

At this point in my career, courses are secondary and viewed more as opportunities to learn things and build tools that will directly apply to either my research or the research assigned by my professor (i.e. boss). It’s effectively a form of professional training that my boss covers via tuition waivers. It also covers the time I’m supposed to spend working on my dissertation. My dissertation is supposed to “create knowledge” and is basically a book on some topic in my field. In this way, it’s like a scholarship for my professional development. At no point does the money from a tuition waiver ever touch my bank account.

My time is theoretically split 50/50 between one of the three work roles listed above and my studies/dissertation. As a result, I am paid a monthly stipend assuming 20hrs/week for my work, not an hourly wage. These stipend amounts vary depending on the university and even the department within a given college. My stipend amount will also vary depending on where I stand in my education and what job I have – fellowships usually pay the most, and RAs and TAs vary and increase as you move up. To move up (i.e. get promoted), you have to take intense oral and written exams. First professors grill you on their areas of expertise to be considered an official Ph.D. candidate, then you present your area of expertise (your dissertation work) and they grill you on that before your final promotion and, more importantly, before you can officially complete and submit a dissertation to graduate. For a public institution like UW, you can look up the categories and amounts paid (note that most graduate students are schedule 1&3).

Within the College of Engineering at UW, monthly stipends range from ~$2,300 – $2,900 (i.e. a first year TA/RA in Civil Engineering to a fully promoted Ph.D. candidate in Computer Science & Engineering) which amount to a yearly salary of $27,600 – $34,800. For reference, the median household income in Seattle in 2015 was just over $80,000 with a cost of living to match. In-state tuition for most UW graduate students in 2016-17 was $10,753 and out-of-state was $34,791, not including summers. For most Ph.D. students, that cost of tuition has meant very little – I honestly didn’t even know the cost of UW tuition until I looked it up for this post because, again, I’ve never touched it. When I pay taxes, I pay taxes on my stipend because that is the only money I see and that serves as useable income.

There are a number of excellent pieces out there right now explaining the impacts of the proposed “Tax Cuts and Jobs Act” that was announced on November 2, 2017. There are articles in a range of news outlets from Forbes to Vox along with a letter from the American Council on Education and a useful summary document put together by the Student Advocates for Graduate Education (SAGE) Coalition. Most of them focus on the proposed elimination of Section 117(d) from the tax code, because it is this part of the bill that will hit the education system the hardest. As the Forbes article points out:

“Despite earning $23,000/year, you’d pay taxes on $40,520 or $57,914 at a public University, and despite earning $32,500, you’d pay taxes on $81,440 at a private University. For this last figure, this would result in a higher tax rate than anyone else in the nation pays. These numbers represent increases in taxes of $2,628, $6,193, and $10,650, respectively, on these hypothetical graduate students. (Computed using the H&R Block tax calculator.)”

The best case scenario amounts to over a month’s income in additional taxes (NOT total) for graduate students. While graduate student income will be hit the hardest, the bill will impact more than just current graduate students. As my mother-in-law (an academic advisor to athletes at Marquette University) pointed out, if Section 117(d) is eliminated and tuition waivers are taxed as income, the majority of university employees will be impacted, not just graduate students. While graduate students are the basic labor force that keeps universities moving, professors and administrators often rely on tuition waivers to support their professional development and their immediate family members’ educations. At a private university like Marquette, given the high sticker value of tuition, treating waivers as taxable income would increase an average administrator’s taxes by 150%. To add insult to injury, the higher tax bracket would also result in a reduction in the amount of aid they qualify for via FAFSA. For some, this will mean choosing between their job (i.e. whether or not they should leave a relatively low-paying academic job for industry) and the students they support or their children’s education.

Ultimately, the elimination of this single section from the existing tax code will impact the financing structure for the higher education labor market at every level. Such impacts will either drive out brilliant minds who simply cannot afford their jobs anymore, or will financially cripple universities as they try to shield their employees from the worst effects through ad hoc financial reform.

The impacts of the bill are not, however, limited to universities and their employees. It will also eliminate:

• Section 127, which exempts employer education assistance from being taxed
• The Lifetime Learning Tax Credit
• The Student Loan Interest Deduction
• Consolidation of the American Education Opportunity Credit to only be used for 4 + 1 years

Combined, these will result in increased taxes across the board for anyone who was not able to pay for college tuition out-of-pocket and for anyone currently relying on any professional development education. In the field of civil engineering for example, to maintain your Professional Engineering (P.E.) license in most states, professionals must complete set amounts of Professional Development Hours (PDHs). Essentially it requires the professionals in our society who are responsible for designing every aspect of the built environment that doesn’t move must stay up-to-date on new developments and knowledge. This is not a cheap proposition, but it ensures higher quality work, safer living environments, and fewer wasted resources (both in time and materials) among other things.

Regardless of your political affiliation or opinion of the current administration, this tax plan is a clear assault on higher education in this country. Regardless of which rankings you look at, the US is currently home to the top universities in the world, with 5–8 of the top 10 (depending on which rankings you look at). These universities draw the brightest minds from around the world and offer educations to millions of Americans. The sheer volume of excellent universities in the US is astonishing and truly sets us apart in the world. The system relies on graduate student labor, from the course administration to the research that keeps US universities at the top of the world. This tax plan will harm this system, limiting access not only for graduate students, but for most university staff, and ultimately all middle- and lower-income individuals seeking a higher education of any form. As the world continues to globalize and automate, the importance of an education, especially a higher education, will only continue to increase. By crippling higher education, the US is effectively handing over the power to shape the future of our world to other countries.

This is not Making America Great and it certainly is not Putting America First.

Please consider contacting your representative about this issue. By typing in your address to https://callyourrep.co/, you get the phone numbers and addresses for your representatives. The SAGE document (mentioned above) also provides an example letter and more contact resources and a list of the representatives on the Senate Finance Committee who are responsible for reviewing the bill before it goes up for a vote. You can track the bill (formally H.R. 1) here and even sign up for alerts – the bill just passed the House of Representatives (11/16/17) and is on its way to the Senate Finance Committee where it will need to be reconciled with the version of the bill on which they have been working. For a further breakdown of what the bill will do and how it compares to the Senate bill, see this post.