Federal tax proposals and the MIT community

November 16, 2017

To the members of the MIT community:

The tax legislation now pending in Congress contains several provisions that could have damaging impact on members of our community and the Institute as a whole.

Because the situation is complex and fluid, I write to offer our current assessment of which provisions concern us the most and why, and to let you know that MIT is actively following developments in DC and striving to achieve a better outcome. If you share our concern, you can express your views to Congressional leaders.

What provisions in the pending tax bills concern us most?

Congress is considering several provisions that could place new and potentially very serious financial burdens on students (especially graduate students), remove important incentives for employees seeking further education, and diminish the funds MIT relies on for research, education and financial aid.

At a time when officials across the political spectrum stress the value of increasing access to higher education and of building US economic strength through innovation, these measures seem counterproductive. For example:

  • Impact on students
    The House version of the bill would repeal several current tax provisions that help students afford university education, including eliminating the deduction for interest on student loans.  It would also treat tuition reductions for graduate students as taxable income.  If this change became law, it could have severe consequences for our nearly 7,000 graduate students, perhaps increasing an individual’s income tax by as much as $10,000 a year.
    In arguing against this provision, we take great inspiration from our graduate student leaders, who are conducting intensive phone-banking to make sure Congress understands that, for a graduate student receiving the average stipend of $37,000, a new tax burden on that scale could be devastating.  MIT would have to provide further aid to compensate, which would lead to a sharp cut in the size of the student body. This week, our students are working to spread the word in print, on radio and through social media, making clear what’s at stake for them personally and professionally, and arguing that to discourage advanced education is to squander the kind of talent that could bring the nation new knowledge, innovation and economic growth. 
  • Impact on faculty and staff
    The House version of the bill would eliminate some current tax provisions that help our employees defray the cost of further education.  For example, it would treat tuition waivers for employees and their families as taxable income. Again, a tax that would make higher education more expensive for families is hard to understand. We are also concerned about other provisions that would put a drag on innovation.
  • Impact on the Institute
    Both the House and the Senate versions of the bill would impose a tax on the net investment income generated by the Institute’s endowment. MIT’s endowment income is a primary source of funds for the work central to our mission: supporting research (including by covering the unreimbursed indirect costs of federal grants) and advancing education, especially by providing the financial aid that keeps an MIT education affordable to students of modest means, and by pioneering digital pathways to make higher education accessible to all. Taxing endowment earnings will directly reduce our ability to fund MIT’s core purpose.

How is MIT taking action?

Several MIT offices – including MIT’s Washington office, the Office of the Vice President for Finance, the Office of the General Counsel and the Chancellor’s office, which is working with the graduate student community – have been collaborating to assess the implications of the bill and to express our concerns strategically in DC. In addition, MIT is working closely with the Association of American Universities and other university groups, which have been publicly outspoken and very active in building Congressional opposition to these damaging tax proposals. 

What happens next?

This week, the House will vote on its version of the bill, and the Senate will consider its version in the Senate Finance Committee.  A final bill will not be ready for a vote for at least several more weeks. 

In the meantime, we are intently focused on persuading Congress to remove provisions that would derail our students’ education, damage our ability to prepare these exceptionally talented young people, thwart their scientific and technical contributions, and discourage the research and innovation the nation depends on.


L. Rafael Reif