If the House Republican tax plan becomes law, Penn State graduate students and employees with children attending the university will experience a tax increase. But on Wednesday, Penn State President Eric Barron spoke out against the GOP legislation’s effect on higher education.
On Nov. 16, the Tax Cuts and Jobs Act passed in the Republican-majority House along a mainly party-line vote of 227-205. Only 13 Republicans voted against the legislation, which Barron said would increase the cost of higher education for students and employees.
If the bill becomes law, a provision of the tax code that doesn’t tax scholarship, fellowship and grant funds for graduate students will be repealed. Graduate students studying and teaching in the STEM fields represent the largest group affected. Of the about 145,000 graduate students nationwide who would shoulder the higher tax burden, 60 percent are studying within STEM fields, according to the Department of Education.
The tax increase varies around the nation based on tuition costs, but Barron said the 4,000 graduate assistants and 400 graduate fellows at Penn State would have their taxes increased by about $2,000 per year.
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Penn State lies within the 5th Congressional District, which is represented by U.S. Rep. Glenn Thompson, R-Howard Township. Thompson voted in favor of the bill.
“While the House bill does remove the preferential treatment of graduate education tuition vouchers from counting towards one’s income, the very spirit of the bill is to make a more simple and fair tax structure,” Renee Gamela, Thompson’s communications director, said in an email. “It nearly doubles personal and joint filer exemptions and leaves in place exemptions provided to academic scholarships. Graduate students, like all Americans, will be taxed at lower, simpler rates based on the compensation they receive. Nothing prohibits universities from restructuring the way they provide compensation packages.”
The legislation also repeals a provision that deems tuition reductions for university employees with enrolled children as non-taxable. About 4,200 employees have children enrolled at the university and that group would pay a combined $5 million in additional taxes each year, according to Barron.
The bill is now in the Senate and a vote is expected next week. The current version of the Senate bill does not repeal the two provisions, but if it is passed, the bill will be discussed in a House and Senate conference where the discrepancies between the two pieces of legislation would be worked out.
“While there are a few items causing consternation, the Senate version does not remove the tuition voucher exemption,” Gamela said. “As a strong supporter of higher education, the congressman is hopeful there will be some resolution to this issue in a conference between the House and Senate.”