The Grad Tax: What we know, and what we can do

Last week, the House of Representatives passed H.R.1 – Tax Cuts and Jobs Act. Along with many other troubling provisions, this legislation proposed to strike subsection 117(d) from the current tax code, which concerns remission for university employees. We believe this bill would damage graduate education in the US, and could potentially add undue financial burdens to current graduate students if signed into law. Given the urgency of the issue, we offer our perspective to clarify recent misleading information from the Cornell Graduate School on H.R.1, and encourage you to pressure your senators and representatives to reject this provision.

Grad workers’ tuition is set and controlled by the University, and is often either waived as a condition of our employment as TAs, RAs, and GRAs, or is paid through external fellowships. Under the current federal tax code, this amount is not considered income for tax purposes when waived. The tax proposal put forward by the House of Representatives seeks to remove subsection 117(d), and would make tuition waivers or reductions for graduate students, as well as any employee taking classes, taxable income. In short, this would drastically cut graduate students’ take-home income after taxes. In practice, this would disproportionately hurt students of color, first-generation college students, those from the working class, supporting families, or who already shoulder debt, and other so-called non-traditional students, directing potential students away from graduate schools across the country. As such, this policy would effectively close off graduate education to all but the wealthiest students who could independently support their study.

The potentially devastating effect of H.R.1 on U.S. higher education has been discussed in a number of forums including The New York Times, The Chronicle of Higher Education, Inside Higher Ed, The Nation, The Washington Post, and NPR. Additionally, the National Association of Graduate and Professional Students and the Modern Language Association’s Committee on the Status of Graduate Students in the Profession have denounced H.R.1.

Precisely how the proposed tax bill would affect grad workers at Cornell remains unclear, yet the Cornell Graduate School has assured us that Cornell grads will not be affected by the proposed change in tax policy. This assurance was a disappointingly dismissive perspective on the issue. The recent communication from the Cornell Graduate School stating that “Cornell University does not rely on 117(d) for favorable tuition-related tax treatment of funded graduate students, who are considered students, not employees, at Cornell” and “the proposed repeal of section 117(d), if passed into law, will not have an impact on how Cornell graduate students' tuition scholarships are handled” was at best misleading and at worst blatant propaganda.

Here is what we know:

  1. Following the Columbia University decision, graduate students at private universities are considered statutory employees covered by the National Labor Relations Act (NLRA), regardless of Cornell’s willingness to recognize us as workers.
  2. Employee status can vary under different federal statutes or in different jurisdictions. Being considered an employee with the right to organize under the NLRA does not necessarily equate to being an employee for tax purposes. Calling grads ‘workers’ in recognition of labor rights would not necessarily contradict calling grads ‘students’ in tax paperwork. In fact, the Columbia University decision suggests that graduate students’ status as students could constitute “an additional relationship” beyond the purview of the NLRA. Given this ambiguity, definitive statements which claim or insinuate that grads’ labor status as ‘workers’ will negatively affect their tax situation (or that their status as ‘students’ will shelter them from such negative effects) are dishonest.
  3. Tuition waivers for students with assistantships are linked to work performed for the University. They are provided as part of an assistantship package, can be terminated for failure to perform assistantship duties, and are never clearly designated as scholarships on assistantship paperwork.
  4. Subsection 117(d)(5) specifically references teaching and research assistants as benefiting from qualified tuition reductions. Since both qualified scholarships and qualified tuition reductions both previously fell under the same exemption, the current tax code does not clearly define what distinguishes a qualified scholarship from a qualified tuition reduction.

In light of these facts, it was irresponsible of the University to communicate certainty to grads in their interpretation of H.R.1, which recently passed through the House. Other private universities have released either far more reserved statements about the bill, or none at all.

Currently, the United States Senate is considering their own version of the tax proposal, which retains subsection 117(d). Once the Senate votes on their version of the tax bill, they will conference with the House of Representatives and reach a consensus on the final language of the tax proposal, which will then be sent to the President to be signed into law or vetoed.

There are a few ways we can work together to push back on this bill. Calling your senators and participating in the letter campaign sponsored by the American Federation of Teachers to oppose the bill are good places to start, but are not the end. Ultimately, we grads need a structure to help us advocate for our position when the University needs to make difficult monetary choices; this has always been true, but is now urgent. The University is a corporation with a bottom line – if it has to act with “fiduciary responsibility” to protect its (potentially newly taxable) endowment, grad workers will be some of the first to suffer financially. The main function of collective action and a collective voice in the form of a union is to help us advocate for our working conditions in these uncertain times.

We encourage you to get in touch with the CGSU Steering Committee at should you have any questions or concerns. We also encourage you to attend our General Assembly meeting on December 7 (whose formal announcement is forthcoming), where the proposed tax bill will be a continued topic of conversation.