TAA Tuition Waiver Proposal Faces Tax Issue

Tax concerns could hamstring a proposal by the Teaching Assistants’ Association to permanently waive in-state fees for graduate employees.

But the TAA’s chief negotiator says the union’s attorney advises that a full-tuition waiver would pass federal regulations concerning taxable income.

At issue is whether the Internal Revenue Service would consider a full-tuition waiver accompanied by an equal pay reduction for teaching assistants — as the TAA recommends — as taxable income. Currently, graduate assistants with one-third time appointments or more have out-of-state tuition waived, but not in-state fees.

The full-tuition waiver is the TAA’s main request in its contract negotiations, which began yesterday. The two-year contract for TAA, the union that represents about 2,100 employees, ends June 30.

John Torphy, vice chancellor for administration, says if the university agrees to the TAA proposal and the IRS found the proposed waiver to be taxable income, the university would have to pay the amount of income tax that should have been withheld as well as both the employee and employer Social Security contributions.

“The university is concerned with the rising costs of tuition for teaching assistants, but we are also concerned with possible tax liabilities from this proposal,” Torphy says.

Eric Haxthausen, chief negotiator for the TAA’s bargaining team, says benefits, such as a full-tuition waiver, are taxed if they are “not in excess” of what’s called reasonable market compensation. That’s because the IRS doesn’t want employers to pay workers with benefits instead of wages to avoid taxes.

According to Haxthausen, a second-year doctoral student in economics, graduate employees here are paid below the market standard in contrast to comparable universities. He says gross average pay for teaching assistants on campus is highest among Big Ten schools, at about $13,500 per academic year. But after tuition and taxes are paid, net wages are about $6,800 — lowest in the Big Ten, Haxthausen adds.

“If we subject our proposal to the market test, the tuition waiver would pass,” says Haxthausen.

Torphy, however, says that surveys of TA salaries among the Big Ten and other peer institutions do not show that UW–Madison teaching assistants are the lowest paid.

TAA rallied on campus Feb. 27 to highlight its contract demands. Paced by a brass band, supporters carrying signs and a miniature replica of Bascom Hall marched a circuitous route from Library Mall to Bascom Hall and back. After the march, several speakers encouraged union members to band together in support. Similar rallies were held the same day on more than 30 campuses across the country as part of what was billed the “National Day of Action.”

Other contract items TAA is asking for include health insurance for domestic partners, updated discrimination language and clearer workload expectations.

Michael Rothstein, an administrative officer in the Office of Academic Personnel, says Wisconsin and Michigan are the only Big Ten schools with collective bargaining agreements for teaching assistants. Michigan waives tuition for TAs as part of its union agreement, but Michigan’s tuition remission program does not provide a uniform tuition benefit to all TAs and has never been audited by the IRS.

“These remissions at Michigan have always been provided and were not financed by salary reductions,” Rothstein says.