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Tuition Vouchers to Be Taxed Under Proposed Revenue Bill

By Brett Altschul

A new tax bill under consideration by the U.S. House of Representatives has aroused the ire of many graduate students at MIT. A controversial provision in House bill H.R. 2014 repeals Section 117(d) of the tax code. That section exempts the tuition vouchers that colleges grant to graduate students from income taxes.

"It's a serious proposal to tax tuition," said Isaac M. Colbert, senior associate dean of the graduate school.

The Graduate Student Council held a petition drive in Lobby 7 last week and collected over 450 signatures from students opposing the measure, said Geoffrey J. Coram G, president of the GSC. "We feel that it's the wrong thing to do," he said. The petition was sent to several members of the House and Senate, he said.

Effects of bill are unclear

How the bill would affect MIT graduate students remains difficult to determine. Coram said that the graduate students with whom he had spoken differed on the bill's impact.

"Some of the students feel that the repeal would not affect MIT," since some tuition relief is dispensed in the form of non-taxable scholarships, he said.

Tax vouchers, however, which are deductible under current law could be changed. Colbert said that he had not actually read the bill, so he could not be sure if the tuition vouchers would be deductible under the new legislation.

However, even if the tuition payments remain tax-deductible, "the proposal would cause cash flow problems," he said. If the IRS withholds some money for taxation and then refunds it, students could be seriously inconvenienced.

Colbert criticized the idea as pointless. "It's superfluous to tax money that the government doesn't expect to have in the treasury," he said.

If tuition vouchers are not tax deductible, the consequences could be dire. The move would "place an immediate pressure on many professors to raise stipend levels to cover the taxes," Colbert said.

As a result, professors would have to hire fewer graduate students, he said. "This could seriously impair people's ability to get a graduate education," he said.

In addition, students getting their funding from other sources could also be taxed under the proposed code, Coram said, imposing a heavy financial burden.

Bill faces rocky road in Senate

The fact that the provision is not contained in the Senate tax bill lowers its chances for survival. "I would think it does not have a real chance in the Senate," Colbert said. "My understanding is that the bill has no real support" there, Colbert said.

"The whole business is frankly a little bit premature," said Thomas R. Henneberry, director of insurance and legal affairs.

Nevertheless, groups are mobilizing to strike down the legislation. The final bill will be written by a House-Senate conference committee charged with ironing out the differences. Coram said that the GSC would target the members of that committee with lobbying efforts.

However, Colbert said that it is also important to send a message to the bill's supporters. "We need to send a message to the bill's sponsors in the House," he said. Those who back this proposal need to understand the importance of a graduate education, Colbert said. We need to express our opposition, he added.