University raises concerns over Congressional tax plan

The university administration came out in opposition last week to provisions in Congress’ Tax Cuts and Jobs Act that would impact Tufts and other institutions of higher education.

The House of Representatives passed a version of the tax reform bill earlier this month, which included several provisions that would affect Tufts, and the Senate is expected to vote on its own version of a tax plan by the end of the week following the Senate Budget Committee's approval of the bill yesterday, according to The New York Times. Among the proposed changes is the elimination of tax-free tuition waivers for graduate students and tuition reimbursements for employees, along with implications for endowment spending, charitable giving and the private activity bonds which allow schools to finance capital projects.

University President Anthony Monaco posed his concerns about the plan through a Nov. 22 letter to the Massachusetts Congressional Delegation, in which he described the detrimental effect that the legislation would have on higher education.

"The legislation includes several proposals that would negatively impact our students, employees and our institution, ultimately making college less affordable, discouraging participation in higher education, and decreasing U.S. competitiveness globally," he said.

Mary Jeka, senior vice president and general counsel, noted that Tufts is lobbying against the plan alongside many other institutions within higher education such as the American Council on Education and the National Association of Independent Colleges and Universities.  

Ph.D. students in many departments currently receive tuition waivers in exchange for serving as teaching assistants or conducting research. Current law does not tax these waivers, but a provision of the new House bill would require them to be taxed.

“This would have a devastating impact on our graduate teaching and research assistants as it would increase a student’s income tax by as much as $10,000 per year,” Monaco said.

Karen Panetta, dean of graduate education for the School of Engineering, explained that taxing tuition waivers would disincentivize many students from pursuing further education because they would be responsible for paying the tax in addition to paying off large amounts of undergraduate debt.

"Now you've got your undergraduate debt plus your graduate taxes to pay, so most people in STEM are going to get that $80–90,000 a year job versus spending another 3–4 years of college for the unknown and lots of debt," she said.

James Rizzi, a teaching assistant and Ph.D. candidate in the Department of English who was instrumental in graduate students' in the School of Arts and Sciences vote to unionize last spring, noted that the time and opportunity cost of graduate school would no longer be possible for many students in the Graduate School of Arts and Sciences as well, adding that these taxes would push many out of their current programs.

"[Many of my colleagues have] realized that they would not be able to live the life of graduate students, to be able to pay rent in this part of the world and to buy groceries, if they had to pay the taxes that are being proposed," he said.

Panetta explained that if the House plan is implemented, either students or the university will have to bear this tax burden. If the latter were held responsible, she said that faculty would effectively have to take on fewer students.

Rizzi and Panetta both noted the implications this would have for socio-economic diversity in graduate programs.

"If this version of the bill passes, then academia will be completely unrecognizable within a decade," Rizzi said. "Right now we have at least a meritocratic ideal that anyone from any background can get into graduate school and become part of this large discussion that shapes our culture… If this tax bill passes the only people part of that discussion will be people who are able to afford to be there."

Rizzi added that driving talented students out of graduate school would have large trickle down effects to other parts of society.

"The work that is done in graduate school is and has been for almost a century now a real investment in our culture and in our industries," he said. 

Monaco in his statement agreed that this change would have long-term implications for the U.S. workforce.

“Withdrawing support from this talent development pipeline will have negative consequences on our nation’s workforce in a time of increasing global competitiveness,” Monaco said.

Monaco also outlined concerns related to the House bill's elimination of certain tuition reductions and tuition reimbursements that increase access to education for employees and their families. He noted that 50 percent of those employees receiving tuition reductions earned $50,000 or less, and 78 percent earned $75,000 or less.

The House bill also contains provisions that would decrease charitable giving, which is a major contributor to the university's spending in a wide range of arenas.

"These charitable donations are an important source of Tufts' operating revenue, supporting student scholarships, professorships, academic programs, research, and other important initiatives," Monaco said.

The current proposals would also subject endowments of universities with over 500 students with a value of more than $250,000 per student to a tax. Monaco noted that, while Tufts would not be subject to this tax at this point in time, the provision sets a precedent that would decrease opportunities for endowment spending, which funds scholarships, fellowships and academic programs.

Both bills also eliminate private activity bonds, which Monaco noted the university currently uses in financing capital projects.

“This proposal will result in higher borrowing costs, leading to diminished investments in infrastructure, fewer jobs, reduced public services, and increased service charges and other fees,” he said.

Panetta explained that such bonds were crucial in the development of buildings such as the Science and Engineering Complex, and that their elimination will lead to the university sacrificing maintenance projects for current facilities such as upgrading seats in the classroom, painting the walls and upgrading furniture.

"You're going to see a lot more wear and tear on things before we can refurbish existing infrastructure, which is not really a good strategy because it's going to cost you more [at the end] if you don't keep do the upkeep," she said.

Panetta added that these changes would impact plans that science, technology, engineering and math departments currently have for construction around the Green Line Extension plans and upgrades within Halligan Hall to promote collaboration between disciplines.

"All of a sudden, we're going to be constrained on what we will be able to afford to do to carry out those plans,” she said.

Jeka noted that the university is keeping a close watch on Congress as the debate unfolds, and that it has not yet determined its response should the plan go through.

“Because the various proposals are still under discussion and could change, it’s not possible at this time for us to speculate on how we would respond,” she told the Daily in an email. “As the debate evolves, a bill, its potential impact, and the university’s potential responses will become clearer.”