Federal tax bill may not impact students as negatively after update
Graduate students protested against a previous version of the tax bill for treating graduate studetns’ tuition waivers as taxable income, which is not included in the final version of the bill. (Anthony Ismail/Daily Bruin)
By Sharon Zhen
Jan. 7, 2018 10:03 p.m.
Student leaders and experts said they think a new federal tax law that goes into effect this month does not impact students as negatively as previously proposed tax bills.
Unlike the initial tax bill proposed by Republicans in the House of Representatives in November, the final version of the law does not tax graduate students’ tuition waivers, said Steven Bank, a law professor who studies federal taxation. Bank added the law also allows individuals to deduct student loan interest.
“The best way to put it is students dodged a bullet,” he said.
Bank added students or their parents who are working will pay lower taxes because the law lowers marginal tax rates.
“For many students, that will be a little bit more money in their paycheck than they would have otherwise gotten, which is probably good news,” he said.
Although the law lowered taxes in general, Bank said a new provision that caps deductions for state and local income taxes to $10,000 will negatively affect states like California that have high taxes. Previously, individuals could deduct all of their state and local income taxes.
Bank said that some states have higher taxes because they prefer to spend more on social welfare than other states. He added Californians pay higher property taxes because of the high value of their homes.
However, Bank said that if individuals living in high-tax states can deduct their state and local taxes, the federal government would receive fewer funds it could distribute to other states.
“If Californians want to vote in representatives and vote for high taxes, that’s fine, but why should people in Mississippi have to pay for it?” he said.
Student leaders said they think protests and activism by students led to the final version of the tax bill leaving out provisions that would have hurt students.
Michael Skiles, Graduate Student Association president, said he is glad graduate students and people across the country rallied together to advocate against the initial proposal to treat tuition waivers as taxable income.
“I think probably graduate students showing against that particular measure was one of the strongest nationwide graduate student advocacy actions in a long time,” he said.
Skiles added his office plans to send students to Washington D.C. to lobby for public service debt forgiveness that students receive to not count as taxable income. Under the current law, a student who earns $40,000 a year in public service with $100,000 of their debt forgiven would be taxed as if their income were $140,000 that year.
Parshan Khosravi, GSA external vice president, said his office plans to hold educational campaigns to help students familiarize themselves with the new tax policies. He added he thinks the other provisions of the bill, including tax cuts for wealthy individuals, will hurt the country in the long run.
“The top 1 percent got their tax breaks and were able to enjoy getting richer and the bottom of the poor just got more marginalized,” he said.
