Utah graduate students would take a significant hit under the tax bill approved Thursday by the U.S. House of Representatives, and the state’s federal delegation is counting on the Senate to fix the issue.
Included in the many provisions of the House GOP tax proposal is a shift away from the traditional tax-free status of campus tuition waivers. Under the bill, those waivers — common among graduate students and the children of university employees — would be counted as personal income and taxed.
All four of Utah’s elected representatives voted in favor of the House bill. But reached Friday by email, members of the state’s federal delegation said they are confident that the tax-free status of tuition incentives would be protected through negotiations between the House and Senate.
“I share the concern about preserving the tuition waiver, which is being addressed in the Senate bill,” said Rep. Mia Love, R-Utah. “I am anticipating it will be preserved as the process moves forward.”
David Kieda, dean of the University of Utah Graduate School, said wavier recipients would see a tax cut under the Senate proposal. But if the House bill becomes law, or if the wording of the final bill ends tax-free tuition waivers, a typical student would stand to lose thousands of dollars.
He said he has run several scenarios tracking how the taxes on a tuition waiver would affect different types of students. Those calculations show a range of a 25 percent tax hike for an in-state student at the U., he said, to cases of an almost 200 percent increase for out-of-state and private school graduates.
“It’s not just the federal taxes,” he said, “because if it becomes taxable for the feds, it becomes taxable for the state and also you have to pay [Federal Insurance Contributions Act taxes] on top of that.”
The result of those changes would mean fewer students pursuing graduate degrees and taking longer to complete their degrees, he said, or a drop in the number of slots in graduate programs as schools are compelled to offer larger stipends and waivers to compensate for increased taxes.
“You’ll have to shrink your graduate enrollment because your budget is fixed,” he said.
Love said she voted in favor of the bill because of its “overwhelmingly positive impact” on Utahns in the form of economic growth and lower tax rates. When asked how the congresswoman would vote if a final bill removed the tax-free status, spokesman Rich Piatt said, “We don’t anticipate that happening.”
Utah’s newest congressman, Republican Rep. John Curtis, described the vote as the first step in a long process of changing the U.S. tax code. Despite some reservations, he said, he voted for the bill to allow the legislative process to continue.
“I support incentivizing education and not penalizing students earning graduate degrees,” Curtis said. “As the House and Senate continue to work through this process, my understanding is the Senate version of the bill includes the tuition waiver for graduate students, and I am hopeful that the final product will keep in place these important educational incentives.”
Rep. Chris Stewart, R-Utah, said he understands where the concerns over tuition waivers are coming from, adding that five of his children are enrolled in college and graduate school courses.
“When the House and Senate work together, we are able to create a better product,” Stewart said. “I am in support of the Senate provisions that keep fundamental tuition programs intact. I am confident that these provisions will make it into the final bill after reconciliation.”
Utah’s fourth congressman, Republican Rep. Rob Bishop, declined to provide a statement to The Tribune.
Senate Republicans are developing their own tax reform proposal, with several key differences from the House counterpart. Any bill would have to pass both chambers before advancing to the president’s desk.
Ending waivers’ tax-free status is “not in the Senate bill and we have no interest in putting it in the Senate bill,” said Conn Carroll, spokesman for Sen. Mike Lee, R-Utah.
Matt Whitlock, spokesman for Sen. Orrin Hatch, R-Utah, said Hatch is focused on “transforming the nation’s tax system from a source of confusion into one that is simpler and fairer for all Americans, and that includes for educational pursuits.”
Incentivizing higher education has a positive effect on the economy, Kieda said, as student earn degrees and return to the workforce at higher earning levels.
“If this is supposed to fix the budget situation it doesn’t — it goes the wrong way and actually is irresponsible,” he said. “If you do a good budget analysis, you should be preferring to retain tuition waivers over the corporate tax cuts.”
Spencer Jenkins, an assistant commissioner with the Utah System of Higher Education, said college and university administrators are communicating with Hatch’s office about the GOP bills.
"We’re watching it closely,” he said. “Obviously, there’s a lot of moving parts to it.”
The House bill would not tax scholarship funds given to students. And Jenkins said it does not appear that undergraduate students who receive an out-of-state tuition wavier to attend a Utah school would be taxed.
As chairman of the Senate Finance Committee, Hatch plays a central role in the development of the GOP’s tax bill. That position also has placed him under fire from critics of the bill’s more controversial elements, such as its repeal of the Affordable Care Act’s individual mandate to get health insurance and the sunset of personal tax cuts that would cause many low- and middle-income earners to see higher taxes in the future.
On Thursday, Hatch lashed out at a Democratic senator who argued that the GOP tax bill prioritizes tax cuts for corporations and the wealthy at the expense of middle-class Americans.
“I come from the lower middle class, originally,” Hatch said. “We didn’t have anything. So don’t spew that stuff on me. I get a little tired of that crap.”