We are concerned about the recent tax reform (known as the Tax Cuts and Jobs Act) and the threats it poses to science. While meaningful tax reform is to be lauded, the current attempt contains a number of troubling provisions that may harm American scientific eminence.
The House bill includes a provision to eliminate Section 117(d), which would count tuition waivers as taxable income. This form of financial aid helps many graduate students afford higher education as the values of these waivers often exceeds their annual income. Under the plan, Penn State graduate students will see our tax bills triple, with an average increase of $2,000.
For example, a graduate student at Penn State who receives a yearly stipend of $25,000 and a graduate tuition of $17,660 would now have to pay tax on the value of the tuition, raising their tax bills by $2,000. Those who attend private institutions with higher tuition would pay even more, some by as much as $8,000.
Because graduate students work long hours for modest compensation, the most likely consequence will be reduced graduate enrollment. With the hit to their pocketbooks, many would drop out or never apply in the first place. According to the U.S. Department of Education, 60 percent of students receiving tuition waivers are in STEM (science, technology, engineering and mathematics). This will have serious consequences for scientific productivity. Graduate students are the engine of science, performing the majority of labor in most laboratory settings. Fewer students would mean fewer experiments, fewer papers published and fewer discoveries.
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According to the Bureau of Labor Statistics, 2.6 million job openings will require an advanced degree in coming years. Increasing barriers to graduate study is counterproductive to addressing the often-lamented “skills gap.”
This provision would also harm education access. Graduate students are an important component of undergraduate education, grading assignments and running lab sections. With fewer graduate students, the quality of undergraduate STEM education will suffer.
If universities choose to bear the cost by increasing graduate student salaries, costs will likely be passed on to undergraduates through tuition increases. Taxing tuition waivers also affects Penn State employees, who receive tuition discounts if their children attend Penn State. Since Penn State is the largest employer in Centre County, this seriously impacts college affordability in our region, especially for lower-wage employees. Coming at a time when the skills gap, STEM education and rising college costs are among key economic issues in our country, these changes to the tax code are deeply misguided.
The tax bill contains other provisions that will harm science indirectly. According to the Congressional Joint Committee on Taxation, the bill will increase the federal deficit by 38 billion in 2018, and by 1.4 trillion in the next 10 years. If the deficit increases, then Congress may choose to cut science funding to compensate. We have seen this before. Earlier this year, President Trump’s budget proposed for 2017 included large cuts to the NIH (medical research), NOAA (weather, climate, and ocean research), the USDA (agricultural research), and others. Though these were thankfully defeated, such cuts may become more easily justified if tax cuts result in increased debt.
On the other hand, the tax reform bill does lower corporate taxes. Could this windfall cause the private sector to pick up the slack? It’s possible, but recent experience suggests this is unlikely. Several companies have stated that increased revenues resulting from proposed tax cuts will be returned to investors, not put toward research. In 2016, the scientifically eminent company DuPont made major cuts to its R&D division in response to shareholder demands, eliminating more than 1,500 workers during an economic boom.
Much of university research explores fundamental processes with little immediate financial payoff. For example, RSA cryptology, which is used whenever you send a secure email address and CRISPR, a gene editing technology that many believe will revolutionize medicine and agriculture exist thanks to novel findings from university research. Other research works in the public interest, such as the research that uncovered the Flint lead crisis. These originate from research most corporations would hesitate to fund.
American military and economic strength has long derived from our scientific eminence. According to President Eric Barron, scientific research at Penn State contributes $2 billion annually to the state economy. “We are” for a meaningful tax reform, but the current attempt will harm American science and the economy of the future.
The authors are members of the group We Are for Science. We Are for Science is a coalition formed at Penn State that advocates for an active and inclusive role for science in society.