I don’t often talk politics on this blog because that’s not what it’s for, but in rare cases I come across a political topic like the Republican Tax Bill that affects not only creative people with Day Jobs, but all of us who don’t quite fit the Traditional Middle-Class Mold of going to college, getting a high-paying job, and working that high-paying job until retirement.
For the past few weeks President Trump’s been talking about a new tax bill that he and others have touted as a way to bring tax relief to the middle class, in addition to reducing paperwork and loosening restrictions on businesses to make them more competitive. Though the exact rhetoric around the bill has been mixed, the White House has been careful to plant the seed that the bill isn’t designed to help the wealthy, and will instead benefit the middle class. Because, as everyone knows, more money in your pocket at the end of the year automatically translates to making a better life for yourself and your family, right?
That tax bill passed the House last month, with a slightly different version passing the Senate nine days ago. From here, only a few committee meetings remain before the tax bill could become law.
Now, I could do a whole other piece about how reducing taxes on mid- to large-size corporations won’t necessarily benefit the people who work for them, since that idea depends on the premise that if we give businesses a whole bunch of money, of COURSE they’ll be kindhearted enough to pass that money on to their workers in the form of higher wages, more vacation time, and employee pension plans and bonuses, right? (As an example of how this works, think of a time when your company did really well. Besides being able to keep your job, how directly did you as a worker benefit, especially over the long term?)
I could also write a whole other piece about how the tax bill was rushed through the Senate with a 479-page unsearchable scanned PDF being delivered to senators hours before the final vote with handwritten changes in the margins, but I’m not going to write about that either. I’m also not going to write about how the bill snuck in an article opening new portions of the Alaskan wilderness up to drilling, how the House version has some specific language abut unborn fetuses that could serve as a stepping stone to repealing Roe vs. Wade, and a special provision that allows the wealthy a tax-deductible fund to send their kids to private school, thus leaving less money for the public schools we need to educate a new generation of Americans whose families can’t afford private school tuition.
Instead, I’m going to write about how this bill affects graduate students, because I’ve got a little more experience in that area.
A Little Background
Back in 2013 I was working a low-paying $11 an hour school secretary’s job at a private school with dwindling enrollment and a lot of unpaid overtime. I took the job because I was having trouble finding work after I got back from Japan and was stuck with a resume that squarely pegged me as an unaccredited ESL teacher, so while I looked for full-time work I was doing housepainting jobs and working on a horse farm to pay my student loans. I was also trying to be a writer, and needed a way to make that happen.
Applying to grad school meant doing weeks of research, writing a bunch of essays, and spending $500+ bucks on application fees, not to mention another $160 to take the GRE exam that most grad schools still require. Fortunately this effort wasn’t in vain, and I got accepted to the University of Nebraska, which meant packing up a carload of stuff and driving to a state I knew nothing about to start a brand-new chapter in my life that would lead to better things.
My acceptance into the Nebraska program was pretty great for a few reasons: while most graduate programs require you to pay a bunch of tuition bills with a little help from financial aid or student loans, the Nebraska deal not only paid for my entire tuition, but it came with an assistantship (i.e., a part-time job in the English department) that paid a stipend of $11,400 the first year and about $16,000 the second year while I took classes, studied, and worked on my writing.
These types of programs where aspiring young people can study, work, develop job skills, and earn a barely livable wage were a lot more common a few decades ago, and are quickly disappearing. Because I wasn’t saving any money at my old $11 an hour job and still had $25,000 worth of undergrad student loans, a program like mine was the best way I could find of developing my writing skills and getting out of my situation without risking financial collapse.
The trade-off was that between my assistantship and all the classes and other grad student stuff I was involved in, I was in for 60+ hour a week commitment juggling duties in a half-dozen areas with a ton of pressure to succeed.
Did I take the deal? Hell yeah I did, since it beat working as a secretary.
What Do Grad Student Finances Look Like?
My first-year stipend of $11,400 was broken up over the ten months of the school year—in June and July you were SOL. After taxes, this came out to $1,092.68 a month, the lowest amount of money I’ve ever had to live on for a set period.
Fortunately rents are a bit cheaper in the Midwest—at the time, you could easily get a one-bedroom apartment in Lincoln, Nebraska for about $500 a month. Even that seemed a little steep though (almost half my pay!), so I jumped on Craigslist and looked at cheaper places that were also within walking distance of campus. I was already used to living in a small space after Japan, so it was no big deal for me to look for efficiency apartments (bedroom and living room are the same room) and studios (living room, kitchen, and bedroom in the same room).
The first place I called about was already taken, but the second one wasn’t. For a mere $330 a month, I sight-unseen rented my own three-room efficiency apartment in an old stone building across from a coffee shop and a Spanish-speaking bakery.
My old building was a hangout for artists, poets, at least one costume designer, and various other cool young people, along with a few old-timers who’d been there forever. One of my downstairs neighbors used to practice scat singing during the day, and one of the laundry rooms had a bunch of paintings hung there.
It was also kind of a dump, with doors hanging off their hinges, beer caps and cigarette butts everywhere, and handrails that wobbled like they might break. My kitchen window didn’t have a screen, so one time when I left it open in the summer a squirrel got in and ate a bunch of my bread right out of the bag. Another time I found a homeless guy sleeping in the closet of our laundry room, though not the same laundry room with the artwork hanging in it (not sure if these things are correlated).
This is a pair of boxer briefs that someone once left outside my door for three and a half weeks. I decided to leave them there to see what would happen, until they got swept up with the hallway trash, sat in the corner for a few more days, then disappeared.
In addition to my $330 monthly rent, I also owed $247 a month on a private student loan that couldn’t be deferred along with my Stafford loan. These two expenses ate up over half of my $1,092.68 take-home pay, so that from the get-go I had a mere $515.68 to spend on utilities, food, laundry, gas, necessities like car registration and insurance, books for my classes, and the barest of treats I allowed myself.
How Did Ian Live on $515.68 a month?
Well, most of the time I didn’t—grad school life was financially possible because I had some money I’d saved in Japan stashed away in a savings account that I withdrew from every month, but I wasn’t sure how long this money would last or whether I’d need it for emergencies or post-grad school life. So, I lived as frugally as I could.
I slept on a futon bed that a friend of mine picked up in Japan and didn’t need anymore after she came back. It separated into four separate pieces that fit in the backseat of my Volvo, which made it perfect to bring to Nebraska, since I didn’t want to spend a lot of money on a mattress.
I ate most of my meals and did my writing on this card table, which I picked up on Craigslist for $25 and subsequently sold for $30 when I left. It came with four padded folding chairs that were the only chairs I had—the rest of the time I sat on a pillow on the floor and set my laptop on my steamer trunk.
The only other piece of furniture I paid for was a plastic Wal-Mart tote I bought after my move-in because I realized how desperately I needed drawers. All of my other bookcases, my dresser, and the piano bench I used to set my printer on I swiped from the alley behind my apartment after various neighbors moved out, though it took two years to furnish my apartment in this manner.
Before I found my alley bookshelves I used this one, which I made from a long piece of scrap board I found at a construction site and wrapped in brown paper once I realized how dirty it was.
I also used to shop at the cheapest of the city’s three grocery stores, an employee-owned Nebraska chain where the food was stored on warehouse shelves and customers had to bag their own groceries, which I was also used to from Japan. I used to save money by taking advantage of their ridiculous sales, so my refrigerator was often filled with shredded cheese or orange juice. They also sold eggs for way cheaper if you bought them in boxes of 2-and-a-half dozen rather than just a dozen, so I always had these huge boxes of eggs on my bottom shelf.
I only lived a mile from campus and downtown Lincoln, so I used to walk to the university and back every day rather than waste money on gas and parking in the downtown garages. Walking in Nebraska basically sucks though because in the summers the heat drains every last ounce of moisture from your body (meaning that I often got to class desperate for water with my clothes drenched in sweat) and in the winters it’s insanely dry with terrible winds that sweep across the open plains and city streets (meaning that I often got to class with chapped hands and face, freezing from cold).
I found other ways to save money too. Once I went to a free evening seminar at my credit union primarily because it offered dinner, and I went my first year and a half hooking my laptop up to the internet via a cable so I wouldn’t have to buy a wireless router. I was also one of the last twentysomethings in my social group to get a smart phone, which meant that I more often than not kept my old keyboard phone hidden in my pocket to avoid embarrassment.
Like I said, most months I still didn’t break even and had to delve into my savings, and to help ease the financial strain I picked up other jobs: occasional work editing manuscripts for an agricultural research team for $9 an hour, and an $800 summer assistantship through the English department that was almost cut due to lack of funding. I also used to drive an hour to Omaha with another grad student to do yard work for one of our professors, which led to a string of other yard work and painting jobs for summers and weekends.
OK, We Get It, You Lived Like a Pauper in Grad School! What Does This Have to Do With the Republican Tax Bill??
My shoestring grad school budget was barely possible in part because I only had $47.32 in taxes deducted from my paycheck each month. My first-year assistantship income of $11,400 was still taxable because I was technically working a job for the English department, but the tuition stipend that came with it wasn’t, and that’s where the Republican Tax Bill changes things.
Because my assistantship covered my tuition, it saved me $14,250 a year in school costs, a waiver that I didn’t have to pay taxes on. However, under the House version of the tax bill, this tuition waver would have been taxed as earned income the same as a regular paycheck, which means that the $14,250 I never laid eyes on would have bumped my yearly income up to $25,650—a thousand dollars a year more than I was making at my old secretary’s job, where at least I could afford a separate living room and could buy eggs in cartons like a regular person.
For most people, because of the way exemptions and deductions work, everyone’s first $10,400 of earned income is untaxed (and this amount goes up only slightly in the new bill), since people who earn less than $10,400 a year generally need that money for things like food and shelter. This is good for grad students who make close to this amount because almost none of that income is taxed, since at the end of the month we’re only earning $1,140 anyway.
But under the new bill my old $1,140 a month would be taxed at a $25,650 rate, meaning I’d be paying closer to $200 a month in taxes on an actual earned salary of $1,140. That would turn my $515.68 a month budget into something like $375 a month—which, even at midwestern prices, isn’t really possible, and would have required even more money in savings to back it up—or taking out more loans that would have put me even more in the hole.
But Ian, Isn’t the New Tax Bill Supposed to Lower Taxes for Everyone?
That’s the thing—though a lot of the PR for the bill has been about reducing tax burdens on everyone, the numbers aren’t quite so sweeping.
A quick glance at this tax bracket chart from Business Insider reveals that in the two current versions of the bill, while most of the tax brackets have in fact been reduced, in the House version of the bill, people making between $45,000 and $91,900 of taxable income wouldn’t see any changes at all, whereas in the Senate version, people making less than $9,325 of taxable income (e.g., grad students) also wouldn’t see any changes.
The really alarming thing, though, is that in the House version of the bill, anyone reporting less than $9,325 of taxable income would actually pay more tax, since this bill treats everyone who makes less than $45,000 equally and raises the rate on the lowest earners from 10% to 12%.
Though these numbers certainly aren’t finalized yet, in any form they don’t mean as much to people at the bottom…though you will notice that in the Senate bill, the tax rate on people making more than $500,000 a year has gone down—a huge tax cut for the people at the top in terms of actual money back (1% of $500,000 = $5,000), while the actual amount saved by people in the bottom brackets is going to be a lot less (3% of $10,000 = $300)
What Are the Greater Repercussions of Making Things Harder for Grad Students?
A lot of people like me use grad school as a gateway to opportunities they couldn’t otherwise get—I got my current Day Job, plus my experience as an editor because I’d been to grad school, not to mention my becoming a better writer, thinker, and informed individual, which in a lot of ways is far more important.
None of that would have been possible without financial assistance, and I’m not alone. A lot of the people I met in the English grad program were in the same boat as me—they needed an opportunity to pull themselves out of other less fulfilling and lower-paying jobs. Other specialized fields, especially in the sciences, require a graduate degree just to get in the door, even if you’re planning to work in industry rather than academia. A lot of mind-building, job training, and practical skills come from grad school everywhere you go.
Raising taxes on grad students makes their already difficult financial lives even more strained, meaning that grad school becomes less of a viable option for more people and programs like the one I went to are likely to disappear at an even faster rate than they are already. That means that the only twentysomethings who’ll be going to grad school are the ones who can afford it already, or who have rich families who can pay their expenses while work their way to better lives.
Simply put, this means that the rich will have even more opportunities for job training and higher pay, concentrating these opportunities at the top and keeping the money that comes from that higher pay in the upper echelons, meaning that the common people’s access to the American dream will be even further stifled than it is already.
Grad school represents an opportunity for people to advance themselves, and these opportunities are exactly the kinds of things we need more of. Australia has a program where people can earn living wages while they work apprenticeships in fields like carpentry and other trade skills, while the vast majority of countries who offer lower college tuition costs than America’s further open the doors of opportunity to people who are willing to study and devote themselves to something, all without sticking them with massive loans after graduation.
More opportunities, more programs, and even more incentives like tax-free tuition waivers—these are the large or very small things we can do to help everyone, young and old, get to where they want to go, a key reason why I started the But I Also Have a Day Job blog. And as Keynesian economic theory tells us, when the majority are doing better and spending money, the economy as a whole does better.
Tax cuts, on the other hand, are more often based on the naïve belief that a bit more money in people’s pockets will magically make everything better—or maybe those tax cuts are really only helpful for people who already have everything they need anyway, while the rest of us need a stairway to climb more than we need an extra 1-2% of our money back.
After all, remember back in 2001 when George W. Bush gave everyone a $300 tax cut and then the economy revved into overdrive and spun to dizzying new heights of glory that made it easier for all of us to achieve our dreams in the decades to come?
Yeah, I don’t either.
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