New tax law attracts science advocates’ scrutiny
MIT and some other universities will be subject to a new excise tax on income from endowments.
Christopher Harting/MIT
An official summary from Congress predicts that the new Tax Cuts and Jobs Act, widely discussed in the media, will “revitalize” the US economy. Given science’s pervasiveness in prospects for prosperity, observers are finding important things to say about science and the new law—even though not one of the bill’s 560 pages mentions the word science.
A few observers from within science have bashed the bill, which President Trump signed on 22 December. In a commentary at The Hill, physicists Michael S. Lubell and Burton Richter, a Nobel laureate, charged that it “promises to deliver bad medicine to a sick patient.” They see it ultimately resulting in the underfunding of science, with negative effects for the country. The Union of Concerned Scientists energetically argues much the same. In gentler tones, so do Science magazine editor in chief Jeremy Berg and MIT president L. Rafael Reif .
Reif also laments that his university and about 30 others with large endowments will now have investment income taxed. He foresees an annual loss of about $10 million for MIT and observes that this “will reduce MIT’s ability to undertake exactly the kind of activities that Congress wants us to pursue—extensive financial aid for students, innovative education, pioneering research.” Berg makes the same argument for all similarly situated universities.
Concerning the interrelated issues of energy and the environment, the New York Times reported that the bill “largely preserves key tax credits for wind and solar power and electric vehicles, reversing language in earlier versions that could have slowed the growth of renewable energy.” But the provision about the Arctic National Wildlife Refuge (ANWR) has drawn vociferous criticism, which that congressional summary sought to deflect.
The summary says that the bill “establishes an environmentally responsible oil and gas program in the non-wilderness 1002 Area” of ANWR. “Congress specifically set aside the 1.57-million acre 1002 Area for potential future development. Two lease sales will be held over the next decade and surface development will be limited to 2,000 federal acres—just one ten-thousandth of all of ANWR.”
But David Malakoff at Science magazine noted that ANWR hosts one of the continent’s largest caribou herds and reported conservationists’ fears that development will harm the animals and “scar sensitive ecosystems.”
In Sacramento, California, the bill ignited a local concern. City leaders scrambled to secure millions for a science center before the end of 2017, thanks to a provision ending federal funding availability.
Some of the science-related tax-bill coverage addresses what the legislators excluded or removed or scaled back.
The Atlantic ran the article “Republicans blow their chance to pass a carbon tax”—that is, their chance to charge carbon polluters a price. The subheadline lamented, “Despite much cajoling and prodding from fellow conservatives, the party didn’t adopt a climate policy in the new tax bill.” The reference to fellow conservatives means opinions expressed last winter by, among others, former Republican secretaries of state James A. Baker III and George P. Shultz.
Higher-education finance figured frequently in observations about the tax law, at all stages of its passage. Legislators removed a provision from the House version of the bill for taxing graduate students’ tuition waivers, which regularly amount to tens of thousands of dollars. It was widely asserted that such a liability would have devastated budding STEM careers. A Vox headline exclaimed that it “would blow a hole in American science.” The New York Times ran an op-ed by a Harvard University doctoral student, headlined “The House just voted to bankrupt graduate students.” When the provision was still alive and threatening, graduate students staged protests in Washington, DC, and some were arrested on Capitol Hill.
Although the final bill did not touch tuition waivers or student loan financing, higher-education funding remains a hot-button issue. The Washington Post reported that some of the new tax regulations will disadvantage upper-middle-class families with kids in college. The New York Times cited “a growing list of graduate school benefits that House Republicans have in their legislative sights.” The Times quoted Justin Draeger, president of the National Association of Student Financial Aid Administrators: “I think there’s a general assault on higher education right now. [It’s] tied into a dangerous narrative in our country about elitism. It undervalues our most important resource, which is our inventiveness, our ingenuity, our ability to solve big problems.”
The Wall Street Journal found it “notable” that the bill, while keeping a tax break for foreign income derived from intellectual property in the US, dropped a related break meant as an incentive for companies to import intellectual property held elsewhere. The WSJ also deemed notable the treatment of orphan drugs—medications with limited profitability because not many patients need them. The House originally intended to eliminate the tax credit for developing such drugs, but the final legislation kept it, though at a reduced level.
Malakoff reported that clean-energy advocates “failed to fully eliminate a provision that tweaks how the government taxes cash that firms transfer into the United States.” The provision, he explained, causes worry that investments in green power will decline.
He also reported that provisions were dropped that “unintentionally undermined one of the nation’s most valuable research-related tax breaks.” The final bill, though, lengthens the period for research-related writeoffs. He continued:
Under current law, companies are allowed to write off many of the costs associated with R&D, and they can take the deductions immediately, in a single year. But in a last-minute change, the Senate had inserted language in its bill that would have essentially gutted the credit, which has been worth some $7 billion annually to companies in recent years. Lawmakers removed that language, but changed the rules so that companies must write off their R&D investments over 5 or more years instead of in a single year.
A commentary at Wired, though, might top all coverage of science-related lacunae in the bill. It frames its omission argument by invoking the Foreign Affairs article “The Fourth Industrial Revolution,” by Klaus Schwab of the World Economic Forum.
Schwab explains the revolution as “characterized by a fusion of technologies . . . blurring the lines between the physical, digital, and biological spheres.” It’s evolving, he says, “at an exponential rather than a linear pace . . . disrupting almost every industry.” The changes “herald the transformation of entire systems of production, management, and governance.” Schwab points to “emerging technology breakthroughs in fields such as artificial intelligence, robotics, the Internet of Things, autonomous vehicles, 3-D printing, nanotechnology, biotechnology, materials science, energy storage, and quantum computing.”
The Wired commentary’s headline, informed by Schwab’s thinking, alleges a big omission from the Tax Cuts and Jobs Act: “Sorry Congress: The tax bill won’t create the jobs of the future.”
Steven T. Corneliussen is Physics Today‘s media analyst. He has published op-eds in the Washington Post and other newspapers, has written for NASA’s history program, and was a science writer at a particle-accelerator laboratory.