Were you a graduate student in 1985? If so, you likely endured the same challenges faced by today’s pre-doctoral warriors: long nights hunched over Petri plates, days split between teaching and re-revising your thesis revisions, and a diet consisting of re-hydrated foods and leftovers from faculty meetings. Graduate students from every generation are united by the understanding that hard work pays off in the long term, and – monetarily speaking – definitely NOT in the short term. As a pre-1986 graduate student, however, you had a slight financial advantage over your contemporaries: you did not give 15% of your modest income to the federal government. This, along with your totally rad 80’s fashion sense, is where you came out ahead of your younger counterparts.
In 1986, Ronald Reagan signed sweeping tax reforms into law. The Tax Reform Act of 1986, which was the most recent major revision of the U.S. tax code, included new rules for taxation of graduate student income. Stipends, which had previously been treated as tax-exempt scholarships, became taxable. Currently, any portion of a student’s stipend that is not used for tuition, books or fees directly related to education is subject to federal tax. Thankfully, most schools waive graduate student tuition and few science programs at the graduate level rely heavily on textbooks. This means that graduate students are basically paying tax on their entire stipends.
According to the results of a survey conducted by the Chronicle of Higher Education, the average graduate student working as a Research Assistant in the field of Biology is paid $18,270 per year (2008-2009; 94 institutions reporting). These students are, therefore, paying ~$200 per month in federal taxes. This is a significant amount of money to students, but it amounts to relatively little income for the government. There are fewer than 500,000 doctoral students nationwide, which means the tax on graduate student stipends generates less that $1.4 billion annually – a drop in the budgetary bucket.
Although most students are probably unaware of the pre-1986 tax exemption for stipends, a lobbying effort to change the current policy has gained momentum in recent years. Strategies to solicit help from Congress have, thus far, been unsuccessful. (Click here and here for articles about student delegations to Washington). However, a graduate student at Drexel University is taking a different approach. Joshua Samuels created a petition asking the Obama Administration to consider restoring the tax-exempt status to graduate student stipends. He argues that this restoration would promote “…this difficult but worthwhile career path.” The petition presents an opportunity for the White House to send the message that education is a priority.
The White House reviews and responds to any petition that attracts 25,000 signatures in 30 days. At the time of this blog posting, the petition had 16,385 signatures (making it the 9th most popular petition of the 121 currently online). 8,615 more are required by November 20, 2011.
Click here if you are interested in signing the petition to restore the federal tax-exempt status for graduate student stipends. Your students will thank you!