Tax-Reform Proposals: Concern Over Taxing Endowment, Tuition Waivers for Grad Students
Published Nov. 21, 2017
As the Senate and the House debated proposed tax-overhaul legislation in November, a pair of provisions were of particular concern to Princeton officials:
- A proposal to impose a 1.4 percent excise tax on net investment income at private schools with endowments larger than $250,000 per student. If it were enacted, University spokesman Daniel Day said, the expected impact on Princeton “would be quite large, likely in the tens of millions of dollars per year.”
- A plan to tax the tuition waivers for graduate students who work as teaching or research assistants. If their tuition were counted as taxable income, The Chronicle of Higher Education reported, “graduate students could find themselves paying taxes on a far greater amount of money than they actually receive in paychecks from their college.”
President Eisgruber ’83 told The Washington Post that Princeton was “deeply concerned” about the proposed endowment tax. University officials pointed out that the endowment supports more than half of the annual operating budget and supports financial aid. “There’s a basic principle at stake here,” Eisgruber told the Post: “You should not tax charity to raise revenue.”
David Walsh, a Princeton Ph.D. student in history, said his tax bill could jump by nearly $10,000 if the tuition waiver were no longer tax-free. Most doctoral students across the country “would see their tuition support taxed as income for at least part of their graduate careers,” Walsh wrote in the Post.
As this issue of PAW went to press, University officials were reaching out to members of Congress as higher-education institutions mobilized to oppose the tax proposals.
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4 Responses
L. Lawrence Chapoy *69
6 Years AgoUnless grad students are independently wealthy, they won't have the free cash flow to pay for the tax on money they never receive. They are being taxed on an in-kind benefit they receive.
Kim Masters ’68
6 Years AgoThe rejection last year of more than 29,000 applicants for admission to Princeton invites resentment and the wish for political reprisal that manifests as the congressional plan to tax the Princeton endowment (On the Campus, Dec. 6). Although letters about rejection of qualified applicants date back to a time when the admission rate was much more favorable to applicants, the situation has become worse, so that admission to Princeton could be compared to admission to the Forbidden City under the Ming Dynasty, and that did not end well.
From the perspective of offering education to the qualified, the University has substantially regressed in its abilities, while the need for education of the population has increased. Princeton has the ability and the obligation to address this issue. Several options present themselves:
The current admission rate reflects a problem that will eventually harm Princeton and impede its stated goal of being “in the service of humanity.”
Donald R. Kirsch *78
6 Years AgoI was a graduate student during the 1970s and was the recipient of a tuition waiver and other financial aid. Had this been taxed as income, I would not have been able to complete my Ph.D.
It is said that a basic principle of taxation is to tax activities you wish to discourage and not tax activities you wish to encourage.
I worked all my life as a biomedical researcher and inventor and in recent years as an author and educator. Thus the question for our policymakers is whether these are activities that the government wishes to discourage.
Zack Winestine ’81
6 Years AgoPrinceton taught me to use language carefully and accurately, and I was therefore surprised that the Dec. 6 issue of PAW featured headlines both on the cover and in On the Campus describing the Republican tax plan as “tax reform.” “Reform,” according to Webster’s, means “to put or change into an improved form or condition.” Unfortunately, the tax bill being championed by Donald Trump and the Republican leadership does no such thing. The negative impacts that the plan would have on Princeton are just a tiny reflection of the negative impacts this plan would have on our country as a whole.