I didn't forget about this... |

Remember how embarrassed a few people were when the Panama Papers (pilfered from the law firm of Mossack Fonseca) were released? When all those supersecret (and illegal) 214,488 offshore accounts were divulged? Which is the reason someone car-bombed Daphne Caruana Galizia and murdered her.

Well, a new set of documents have been revealed. This time, they’ve been garnered from the Appleby Group Services Ltd, a Bermuda law firm. (They’ve been termed the “Paradise Papers”.

And, this time, it’s not just rich SOB’s (including Wilbur Ross, Stephen Bronfman, Yuri Milner, and Queen Elizabeth) who’ve been caught. (I am not trying to omit Apple, Nike, Glencore, or Russian oligarchs- they’re outed, too.) No, now we know that US universities (Duke, Dartmouth, Columbia) have been using offshore investments to avoid federal taxes (but most college endowments are tax-exempt) for some of the more “esoteric” methods employed. But, it’s probably more likely these schools use these accounts so we can’t find out they are heavily invested in fossil fuels and socially unacceptable ventures.

This becomes even more interesting given HR-1 that we’ve been discussing over the past five blogs. Because one section of HR-1 stipulates that there be a 1.4% tax on earnings accrued to various investments of private colleges.

No, not all private colleges. Just those that have amassed endowments that exceed $ 250K per registered student. That attacks some 60 to 70 universities, including Harvard, Princeton, Stanford, and Grinnell.

I can tell you that many of the colleges claim these endowments are critical to maintain funds for salaries, research, and financial aids. Other schools have problems dispensing some moneys because donors have stipulated restricted use on some of the funds they receive- and it takes more time to use the funds to comply with those demands.

For example, the last school mentioned above. Grinnell is a teeny school. 1700 undergrads tucked away in Iowa. And, they provide 90% of their students with financial aid, to the tune of $ 50 million a year. But, then, again, Grinnell has a $ 1.6 billion endowment. That’s 32 years of the annual scholarship needs. And, this tax will yank something on the order of $ 1.5 million from Grinnell to the US Treasury.

Yeah, you can see that I am not really crying about this part of the proposed tax provision.

But, it’s part of the bias behind this bill. Most of the affected colleges are considered “liberal”. Which makes them cannon fodder for the authors of HR-1.

You see, it’s also part of the bias against educational elites. Why would I say this? Because if you study the way the bill attacks education credits for colleges- and restructures what and what is not taxable, you discern a clear intent to punish students obtaining advanced degrees that don’t involve the study of business or law.

Many students (primarily graduate students, but some undergrads) get tuition benefits by providing research (actually, their doctoral and master’s theses) or teaching (as teaching assistants, TA’s- which schools like MIT and Harvard stipulate doctoral students effect to train them to be better professors). HR-1 shifts these educational benefits from non-taxable (or partially taxable) to fully taxable income.

What does this mean in real dollars? Well, if I were to be repeating (G-d help me) my doctoral studies now, I would be beside myself. Using current stipends (to match current tuition levels, the stipends have risen, plus expenses are higher), I would be now receiving a $ 50,000 tuition waiver and a $ 21,000 stipend for books, room, board, and minor living expenses.

Under the old rules, that would mean I wouldn’t pay taxes, since there is about a $ 10,000 waiver on my stipend, and there is no tax due (other than social security and Medicare) on the remaining $ 11,000 of my stipend. These new rules remove those exemptions. My taxable income is now $ 71,000- which means I would now owe more than $ 8500 in taxes.

If you thought my stipend didn’t make ends meet before, you can see that I will need to borrow more money now (for which the interest will no longer be deductible) to cover this new expense.

(You do recall that students are not considered to be employees by these universities. And, many universities have elected to have TA’s, instead of professors, provide student instruction. Which is why so many grad students have been organizing to form unions, to ensure that their stipends match state and federal minimum wage standards.)

This proviso- the one that would squeeze me dry if I were going to grad school today- affects more than 60% of our students majoring in STEM- science, technology, engineering, and math. Those areas critical for the US to maintain (or regain) its lead in the world. That STEM shortage is bound to grow with this anti-educational Congressional attitude.

Yup. This really is the “Tax Cuts and Jobs Acts”. Tax Cuts for the very rich. Tax cuts for corporations that in reality pay at a percentage below our nation’s poor. And, removing the ability of our best and brightest to be trained for those critical STEM jobs.

Tomorrow, what hath the Senate wrought. Mostly the same as the House, but with a few salient wrinkles.