Matt Gardner, a senior fellow at the Institute on Taxation and Economic Policy, said the decision not to tax waived tuition fees is in line with standard taxation principles. The same logic is at work behind the reason why we don’t tax workers for employer-sponsored health insurance.
“When you have income that you can’t really access, that you can’t really use, you shouldn’t be taxed on it,” Gardner said.
He said tuition waivers have been tax-free for almost half a century. Overturning that precedent and taxing waived tuition fees would bump graduate students up several tax brackets.
“You are going from a situation where these people are recognized as being below the poverty line,” Gardner said, “and putting them in a way where they’re being taxed 10 or even 15 percent.”