Taxing tuition benefits

[RogueDadMD]

Yes file this under the “may never happen” category.
But now GOP wants to tax PhD tuition benefits and the free tuition given to dependents of university employees.

So if that passes and is in effect when my kids are in college, I could end up paying $150-200k in taxes over time for my 3 kids’ benefit (if they get the max value of my current benefit, which is variable, but currently would be $600k max value for 3 kids).

I know people argued about the HRC tax increases we would’ve seen with her, but she probably would’ve mostly just bumped up a couple higher marginal rates and would not be slashing corporate taxes.

Pretty sure she wouldn’t have tried to sacrifice grad students. Or the janitor at the university who uses the tuition benefit to pay for his kids college. No one will shed a tear for doctors, I know, but it’s aggravating how much our income range is being targeted.

[ENT Doc]

So a lot of points about this:

1. It's part of the House bill, not part of the Senate bill, and this will need to be reconciled.

2. I think the goal here is to probably place a tax on what has otherwise been an under-the-table exchange of goods and services.  You teach a class and do research, instead of us paying you a market wage for that we'll pay you a lower wage, and will cover your tuition.  In a normal exchange the university would pay the grad student 2X, student would pay X in tuition and be taxed on X.  For others it's regarded as a benefit without a commiserate reduction in the market wage but the tuition gets subsidized by those parents (or students) who don't have the employment connection.  This inflates tuition for those students.  Funny how the universities are condemning this while at the same time are the main culprits behind tuition inflation.

3. Cutting corporate rates is reasonable on several levels.  I don't think this needs to be explained but happy to do so.

4. HRC's new found socialist bent post-Sanders defeat called for a specific targeting of our demographic to pay for her "free" schooling.  The distortions and taxation under that plan would have been abysmal.  You seem to be frustrated about being targeted by this plan (which does not specifically target high income earners or doctors at all) but freely admit that HRC would have targeted upper tax brackets, which would have disproportionately affected you and most doctors.  Not sure what you're arguing here.  That HRC would have been worse for most doctors?  I agree.

[Kamban]

Rogue Dad, M.D. wrote:

So if that passes and is in effect when my kids are in college, I could end up paying $150-200k in taxes over time for my 3 kids’ benefit (if they get the max value of my current benefit, which is variable, but currently would be $600k max value for 3 kids).

Click to expand...

You are upset because the University promised your kids free education if you worked there for less than your market wage. You took on that offer. It is mostly the university's fault for offering such schemes when they should have paid you fair wages and charged for your kids education what they would charge other children. But some part of the blame is also on you for taking up that offer and never thinking it might be overturned by the government.

Would the IRS agree if I started to get work done on my office by my patients who are handyman, plumber, electrician, roofers etc and not charged them for their visits and therapies. So why should they agree to your university's scheme. If my patients they work  fixing my office I pay them fair wages for their work and not not undercharge their office visits compared to other patients ( which will be illegal in any case).

As for the janitor, the rules apply to him too. Pay him good wages and charge his children education as per the FAFSA, just like janitor who work outside the university.

[Zaphod]

HRC wouldnt have been able to do anything, GOP would have stonewalled her and at worst we'd have status quo.

[q-school]

Kamban wrote:

Rogue Dad, M.D. wrote:

So if that passes and is in effect when my kids are in college, I could end up paying $150-200k in taxes over time for my 3 kids’ benefit (if they get the max value of my current benefit, which is variable, but currently would be $600k max value for 3 kids). 

Click to expand…

You are upset because the University promised your kids free education if you worked there for less than your market wage. You took on that offer. It is mostly the university’s fault for offering such schemes when they should have paid you fair wages and charged for your kids education what they would charge other children. But some part of the blame is also on you for taking up that offer and never thinking it might be overturned by the government.

Would the IRS agree if I started to get work done on my office by my patients who are handyman, plumber, electrician, roofers etc and not charged them for their visits and therapies. So why should they agree to your university’s scheme. If my patients they work  fixing my office I pay them fair wages for their work and not not undercharge their office visits compared to other patients ( which will be illegal in any case).

As for the janitor, the rules apply to him too. Pay him good wages and charge his children education as per the FAFSA, just like janitor who work outside the university.

Click to expand...

especially it gets convoluted when the universities offer benefits such as paying for education at other institutions.  i am curious how this practice started as i can understand the benefit of keeping smart motivated workers home, increasing ties with their children, and that the cost of the education to the institution is not what is charged.

still i will be equally unhappy when they means test social security or take away COLA from pension, etc.

 

 

[Donnie]

You probably should be taxed for free tuition since it is effectively part of your compensation.

PhD's in most fields offer no promises of high wages.  Taxing tuition would be a serious burden to a PhD who may earn $50-80k when they graduate.  I haven't read the tax bill, but most institutions would likely change to a scholarship concept or figure out some other workaround.  Otherwise enrollment in PhD programs will seriously decline.

[MPMD]

Again, absolutely nothing that is happening is mysterious or complex if you understand who these people are, who they answer to, and what their goals are.

It would be childishly simple to lower taxes on "hardworking middle class families," which is their stated goal. Childishly simple. Pass a half page bill that says if you have earned income and an AGI between $30-100k or whatever you want it to be you get a $5000 tax credit.

Why don't they just do that?

[amphora]

The House "tax reform" is an awful piece of legislation that is designed to hurt Republicans' opponents -- namely blue states, universities, students and the middle class.

To those defending the tax increase on grad students, don't pretend it's about fairness. It's about Republicans disliking elite universities and needing a way to fund corporate tax cuts. Grad school is a path to upward mobility that's being narrowed in the tax plan.

This isn't a middle class or even upper middle class tax cut, it's a corporate tax cut. It penalizes work to the benefit of the non-working wealthy.

[Zaphod]

MPMD wrote:

Again, absolutely nothing that is happening is mysterious or complex if you understand who these people are, who they answer to, and what their goals are.

It would be childishly simple to lower taxes on “hardworking middle class families,” which is their stated goal. Childishly simple. Pass a half page bill that says if you have earned income and an AGI between $30-100k or whatever you want it to be you get a $5000 tax credit.

Why don’t they just do that?

Click to expand...

Decrease payroll taxes. Done. Effects only those earning a paycheck and is immediately and obviously felt in the paycheck, increased confidence, increased spending, increased gdp. Its very simple.

That people are bending over backwards to explain whats happening, or pretending this doesnt actually raise taxes on everyone who earns a living after a short period of time is impressive.

As are all those deficit/debt folks who dont seem to care all the sudden, even though its much much worse at this stage in the game and is the opposite of the rational monetary/fiscal policy playbook. Theres no need and obvious dangers to throwing gasoline on a bonfire, yet the same people made a stink when they tried to do so at the flint/kindling stage.

Worse, no kind of healthcare reform means people are going to be ever more focused on that and start really making trouble. Combined with increased deficits it will kill two birds with one stone to decrease doctor pay. Makes that more likely a target.

[MPMD]

Zaphod wrote:

MPMD wrote:

Again, absolutely nothing that is happening is mysterious or complex if you understand who these people are, who they answer to, and what their goals are.

It would be childishly simple to lower taxes on “hardworking middle class families,” which is their stated goal. Childishly simple. Pass a half page bill that says if you have earned income and an AGI between $30-100k or whatever you want it to be you get a $5000 tax credit.

Why don’t they just do that?

Click to expand…

Decrease payroll taxes. Done. Effects only those earning a paycheck and is immediately and obviously felt in the paycheck, increased confidence, increased spending, increased gdp. Its very simple.

That people are bending over backwards to explain whats happening, or pretending this doesnt actually raise taxes on everyone who earns a living after a short period of time is impressive.

As is all those deficit/debt folks who dont seem to care all the sudden, even though its much much worse at this stage in the game and is the opposite of the rational monetary/fiscal policy playbook. Theres no need and obvious dangers to throwing gasoline on a bonfire, yet the same people made a stink when they tried to do so at the flint/kindling stage.

Click to expand...

They won't do your idea, or mine. Both of which, like I said, could be accomplished with a bill that would have a hard time filling 2 pages double spaced.

If you truly care about the struggling middle class it's the easiest thing in the world to give them significant tax relief. But then who pays for the private plane deduction?

[RogueDadMD]

I prepared a lengthy response to those who are critical of my complaint.

Briefly, you blame me for being upset, but literally everything discussed on this forum short of “save don’t spend” is subject to the whims of Congress and tax reform.

All you real estate magnates and entrepreneurs and even those of you who just saved a ton of money in a taxable account expecting a low LTGC tax did so based to a degree on what you consider “fair” and equitable treatment of different types of “income.”

Perhaps LGTC should be taxed at 50% because no “effort” is involved to earn it, while W2 wages should be cut in half because we had to “work” for it and deserve to keep more of it. Why do any “tax advantaged” account exists at all? If someone saves $2 million in a Roth IRA and the GOP instituted a 50% tax on balances over $1 million, you would be ticked because you put money in there with the idea that it wouldn’t be taxed a second time.

HRC was a known quantity who would’ve at least pretended to help people who really need it by raising taxes on people like me. The GOP doesn’t pretend they care.

There are no sacred cows, just high horses.

[MPMD]

Rogue Dad, M.D. wrote:

I prepared a lengthy response to those who are critical of my complaint.

Briefly, you blame me for being upset, but literally everything discussed on this forum short of “save don’t spend” is subject to the whims of Congress and tax reform.

All you real estate magnates and entrepreneurs and even those of you who just saved a ton of money in a taxable account expecting a low LTGC tax did so based to a degree on what you consider “fair” and equitable treatment of different types of “income.”

Perhaps LGTC should be taxed at 50% because no “effort” is involved to earn it, while W2 wages should be cut in half because we had to “work” for it and deserve to keep more of it. Why do any “tax advantaged” account exists at all? If someone saves $2 million in a Roth IRA and the GOP instituted a 50% tax on balances over $1 million, you would be ticked because you put money in there with the idea that it wouldn’t be taxed a second time.

HRC was a known quantity who would’ve at least pretended to help people who really need it by raising taxes on people like me. The GOP doesn’t pretend they care.

There are no sacred cows, just high horses.

Click to expand...

Brilliantly put my friend!

[Zaphod]

Rogue Dad, M.D. wrote:

I prepared a lengthy response to those who are critical of my complaint.

Briefly, you blame me for being upset, but literally everything discussed on this forum short of “save don’t spend” is subject to the whims of Congress and tax reform.

All you real estate magnates and entrepreneurs and even those of you who just saved a ton of money in a taxable account expecting a low LTGC tax did so based to a degree on what you consider “fair” and equitable treatment of different types of “income.”

Perhaps LGTC should be taxed at 50% because no “effort” is involved to earn it, while W2 wages should be cut in half because we had to “work” for it and deserve to keep more of it. Why do any “tax advantaged” account exists at all? If someone saves $2 million in a Roth IRA and the GOP instituted a 50% tax on balances over $1 million, you would be ticked because you put money in there with the idea that it wouldn’t be taxed a second time.

HRC was a known quantity who would’ve at least pretended to help people who really need it by raising taxes on people like me. The GOP doesn’t pretend they care.

There are no sacred cows, just high horses.

Click to expand...

True story

[Donnie]

Rogue Dad, M.D. wrote:

I prepared a lengthy response to those who are critical of my complaint.

Briefly, you blame me for being upset, but literally everything discussed on this forum short of “save don’t spend” is subject to the whims of Congress and tax reform.

All you real estate magnates and entrepreneurs and even those of you who just saved a ton of money in a taxable account expecting a low LTGC tax did so based to a degree on what you consider “fair” and equitable treatment of different types of “income.”

Perhaps LGTC should be taxed at 50% because no “effort” is involved to earn it, while W2 wages should be cut in half because we had to “work” for it and deserve to keep more of it. Why do any “tax advantaged” account exists at all? If someone saves $2 million in a Roth IRA and the GOP instituted a 50% tax on balances over $1 million, you would be ticked because you put money in there with the idea that it wouldn’t be taxed a second time.

HRC was a known quantity who would’ve at least pretended to help people who really need it by raising taxes on people like me. The GOP doesn’t pretend they care.

There are no sacred cows, just high horses.

Click to expand...

I'm not blaming you for being upset if you were referencing me; however, in the grand scheme of things: you probably should pay taxes on tuition, capital gains should probably not have special treatment, backdoor Roth loophole should probably be closed, carried interest should probably be taxed at ordinary income rates, etc. etc.

[VagabondMD]

If only there were one tax rate that could be applied to all income, regardless of the sources, such that filing income taxes would be as easy as mailing a post card. Wasn’t that the Steve Forbes idea of years past?

Instead we have a complex clusterf of a system that is constantly being modified (or at least there is constant discussion to modify), where every perturbation has winners and losers, where ordinary people are pushed to make ridiculous decisions (like buying an electric vehicle by 12/31, reducing charitable contributions, paying two years of property tax at once, planning deaths to ccour before or after a date, etc.), and in a few years the apple cart will again be upended, creating a different set of winners and losers, new ridiculous decisions, etc.

I do not criticize the OP for being upset. You make decisions with far reaching, long term ramifications in the game of Life, and they keep changing the rules on everyone. It seems reasonable to grandfather in changes and or phase them in, rather than forcing the pendulum to make abrupt moves to and fro.