U.S. science groups make last-minute push to influence final tax deal

It wasn’t your typical graduate school experience. But earlier this week, eight graduate students, including doctoral students in anthropology and astrophysics at major U.S. universities, ended up in handcuffs after they refused to end a noisy protest outside the Washington, D.C., office of Speaker of the House of Representatives Paul Ryan (R–WI).

The arrests were just one dramatic development in a frenzied, last-minute effort by the U.S. scientific and academic communities to shape a major rewrite of the nation’s tax code now being finalized by Congress. The protesters, for instance, want Ryan to help block a House-passed provision that would impose a new tax on tuition assistance that graduate students receive from universities. Biomedical and environmental scientists, meanwhile, are targeting provisions they argue will harm drug development and efforts to promote renewable energy. But time is running short.

The U.S. Senate last week approved a massive, Republican-backed rewrite of the federal tax code that mirrors, in key respects, a bill passed on 16 November by the U.S. House of Representatives. Both bills would dramatically cut corporate rates and, over a decade, deliver a majority of their benefits to the most affluent individuals.

There are also major differences between the measures, however. The Senate bill, for example, would eliminate the penalty that the Affordable Care Act, aka Obamacare, now requires individuals to pay if they don't acquire health insurance; the House bill would not. Critics say the move could result in millions fewer Americans obtaining health insurance.

Republican leaders in Congress have pledged to iron out such differences in time to send final legislation to President Donald Trump by the end of the year. The tight schedule leaves little time for research and university advocates to persuade lawmakers to drop provisions that they oppose.

Here are some research-related flashpoints:

Orphan drugs

The House wants to eliminate the 3-decade-old orphan drug tax credit, which essentially allows companies to write off half the research costs of developing drugs for diseases that strike fewer than 200,000 people. The Senate would keep the credit, but trim its value by about half.

Patient groups, drug companies, and researchers argue that the credit, worth about $2 billion a year in recent years, has encouraged companies to develop hundreds of drugs that they otherwise wouldn't have pursued because the market is too small. “The Orphan Drug Tax Credit gives hope to the nearly 95 percent of individuals with rare diseases without a treatment that one day they too will have a treatment, or even cure,” more than 200 groups argued in an 8 November letter to House leaders. “We cannot afford to move backwards.” The groups estimate canceling or trimming the credit could cut the pipeline of orphan drugs by one-third.

Some critics of the credit, however, believe companies have abused it by claiming the tax break for drugs already in wide use for other purposes. “The industry has been gaming the system by slicing and dicing indications so that drugs qualify for lucrative orphan status benefits,” surgeon Martin Makary of Johns Hopkins University in Baltimore, Maryland, and colleagues argued in a widely cited 2015 commentary published by the American Journal of Clinical Oncology. “As a result, funding support intended for rare disease medicine is diverted to fund the development of blockbuster drugs.”

Tuition waivers

The House—but not the Senate—would require graduate students to pay taxes on certain tuition allowances.

Currently, students who teach or work in a lab are taxed only on pay they receive for those activities. But some 150,000 graduate students, more than half of them in science and engineering fields, also receive free annual tuition, which can be worth tens of thousands of dollars. Not all tuition waivers would be taxable under the House bill, and some universities could alter how the waivers are awarded to help students avoid taxes. But research and higher education advocates say the increased tax burden—for some students it could double or triple—could make it harder for people to pursue advanced degrees.

The fight has prompted many graduate students to act. For instance, among the protesters at Ryan’s office on 5 December were astrophysicist Ben Groebe, a doctoral student at Washington University in St. Louis in Missouri, and anthropologist Scott Ross, a doctoral student at The George Washington University in Washington, D.C. Union and student groups called the protest to call attention to provisions they say will harm education and job training. Both Groebe and Ross were arrested (and later released) after they refused police requests to clear a corridor outside Ryan’s office.

Others are trying to mobilize the community. Benjamin Ackerman, a doctoral student in biostatistics at Johns Hopkins, has created a web app that lets graduate students estimate how their taxes would change if the House provision becomes law. “I don't really consider myself a super politically involved person,” Ackerman says, but “as a graduate student in a quantitative field” he felt it important “to be able to provide some quantitative evidence” of the House provision’s impact. He says reaction to the app has “been a little overwhelming … I've seen some people retweet it, saying, 'This is my tax estimate under this bill. I'm calling my senator today.'” And he says he was “pretty shocked” to see that his own tax bill might go up by about $8000. He says he’s been contacting members of Congress several times a week, because “I want to make sure this specific provision doesn't go unnoticed.”

A trio of doctoral students at the Harvard–Massachusetts Institute of Technology Program of Health Sciences and Technology in Cambridge—Sandya Subramanian, Erin Rousseau, and Jay Patel—were among seven students that drafted an opinion piece decrying the House provision sent to The New York Times . A version of it eventually ran, credited to Rousseau, with the headline: “The House Just Voted to Bankrupt Graduate Students.”

The group was trying to reach “people outside of the academic bubble,” Subramanian says. And Rousseau believes it worked. “I'm from a very small town in upstate New York, and I was seeing my neighbors and people I went to high school with sharing this article and saying, 'Oh I called my [representative].’ It was really nice to inspire that in people, to get people to care and do something about it.”

Alyssa Frederick, a doctoral student in physiology at the University of California, Irvine, has been distributing talking points to be used with members of Congress. “I wrote a script for my whole family and I just underlined the parts where they would need to change ‘daughter’ or ‘sister’ or ‘niece’ and how it would impact me,” she says. “Then I wrote at the bottom the ways to send that to their representatives. … Then I sent that to my [colleagues] at school and said, 'Here's an example of a thing you can do.’”

She estimates the provision would increase her tax bill by about $2000, which “I can’t afford to pay.” And although “of course I'd rather be spending my time doing science … I can't afford to sit by and take it.”

The effort is gaining some support in the House. More than 25 House members have signed a letter to House leaders, drafted by Representative Pete Sessions (R–TX), asking them to drop what Sessions has called a “misguided tax.”

Endowment tax

Both bodies would impose a new tax on colleges and universities with large endowments. The House would impose a 1.4% tax on income from endowments that amount to $250,000 or more per student, whereas the Senate sets a higher floor of $500,000 per student. About 70 colleges and universities would be hit by the House provision, analysts calculate, and the Senate provision would affect about 30.

The schools argue the tax will reduce the amount of money available for scholarships, internal research grants, and other initiatives. “This is an unprecedented ‘phantom tax’ on donors who are making a personal choice about using their hard-earned dollars to fund public goods like student financial aid and cancer research,” Mary Sue Coleman, president of Association of American Universities in Washington, D.C., said after the Senate included the tax in its bill. “Rather than allowing endowment funds to help students and support critical research advances, this excise tax is sending those funds directly to the U.S. Treasury.”

The Senate provision would likely spare some research powerhouses, including Vanderbilt University in Nashville and Brown University. But schools with endowments valued at more than $1 million per student, including Harvard, Princeton, and Yale universities, would pay under either plan.

Arctic oil drilling and renewable energy

The Senate bill would allow drilling in Alaska's Arctic National Wildlife Refuge, home to one of North America's largest caribou herds. Conservationists and climate activists failed to persuade legislators to drop the provision from last week’s bill. Now, their best hope—and it appears to be a long shot—lies in persuading the dozen or so House Republicans who have said they are concerned about Arctic drilling to withhold their support for the final bill if it includes the provision.

Clean energy advocates also want lawmakers to drop House provisions that trim tax breaks for wind and solar projects, and a Senate provision that tweaks how the government taxes cash that firms transfer into the United States. Experts say the change would cut off a major source of investment in renewable energy projects.

R&D tax credit fix

At the last minute, the Senate adopted a change to their bill that analysts say would inadvertently endanger a widely used tax break that allows companies to write off the costs of research and development. After a decadeslong battle, in 2015 Congress made the R&D tax break a permanent part of the tax code. (Previously, it had to be renewed periodically.) It has been worth an estimated $7 billion annually to companies in recent years. But because of the way the Senate tweaked provisions requiring companies to pay at least some taxes each year (a concept known as the alternative minimum tax), experts say the Senate bill essentially wipes out the incentive created by the R&D tax credit.

Once they realized what the Senate had done, senior lawmakers in both bodies scrambled to reassure firms that they will not do away with the research credit. But corporate lobbyists are keeping a watchful eye, given the complexity of the bill and the rush to complete final negotiations.

Those negotiations are sure to involve a complicated game of push-me-pull-you. Lawmakers are operating under rules that allow the bill to pass the Senate with just 50 votes (with Vice President Mike Pence casting the tiebreaker), enabling Republicans to usher it into law without Democrats. But the bill cannot cost more than $1.5 trillion over 10 years. Staying within the cap could require jettisoning some provisions that are popular with one body or the other, or adding new taxes that could alienate antitax conservatives.

Even if the cost does not grow, some science advocates are concerned that the final bill could, over the long term, increase pressure for cuts in federal research spending. Republicans argue that the cuts will pay for themselves by boosting economic growth, but many analysts estimate the bill will add at least $1 trillion to the national debt—now about $20 trillion—over the next decade. That increase is likely to amplify calls to curb spending on the huge entitlement programs, such as Social Security and Medicare, which are the major drivers of the debt. But annual spending on research—a tiny part of the federal budget—could also get caught in the crossfire.