In Mayo Foundation v. United States, the Supreme Court deferred to an IRS regulation finding that medical resident students are not “students” for purposes of the Internal Revenue Code, and have to pay taxes on income they receive from their school.
It stands to reason that many of these students, who will now be liable for a significant bite out of their income for federal taxes will be short on cash. What do students do when they’re short on cash? Presumably, they, will be required to take on additional student loans to support them during their studies. Unsurprisingly, Aunt Sallie is always willing to help out.
Ultimately, this will further increase the debt load of medical students. Eventually, that money will be paid back to the United States, with interest. Here, the government double dips. Tax ’em when they’re in school, collect interest on ’em when they’re out of school. Sounds like a sweet deal.
Update: I’ve heard from a number of medical resident students that it is fairly uncommon for residents to take student loans, in light of the fact that they earn a decent salary. The fact that Sallie Mae, and others offer these loans, tells me that at least some residents accept them. I’m not sure how many do. The broader point about the perverse incentives and unintended consequences of taxation remains.