My PhD adviser and I decided to publish in Physical Review Letters. After nearly finishing the manuscript, he realized the publication cost was $800 and now instead wants to publish in a significantly worse journal that also is not appropriate for the work (Journal of Lightwave Technology) because the publication cost is free. In response, I informed him (for the first time, coincidentally) that I need to TA (as a degree requirement) in January, which will bring in about $25k for us. It seems absurd to me to publish in a worse and inappropriate journal to save money and it seems unethical to be unwilling to kick back $800 of this $25k I’ll be getting. I think he knows that he has the power to take the $25k and save the $800 regardless, though so he doesn’t care. Is he being unethical here?
Is your supervisor breaking any sort of accepted ethical code within academia? No, they are not. They are not engaging in academic dishonesty, plagiarism, bullying, or abuse of any kind. While "what is ethical" is often a matter of opinion, I would guess there are few people who could find any sort of violation of ethics in your supervisor's behaviour.
Indeed, your supervisor is acting like a perfectly normal co-author and is communicating to you their requirements for a publication venue for their work. Perhaps, as you suspect, your supervisor simply does not want to spend the money. Perhaps, as a commenter has suggested, your supervisor is taking their own small 'ethical' stand against the absurd and insulting fee required for publishing in your preferred journal (in my field only sham predatory journals charge for publication). It doesn't matter, really, what their reason is, your co-author will not agree to publish in the journal you want to publish in, which is well within their rights, so you need to publish it elsewhere or dissolve the writing partnership. If you don't like the suggested replacement journal, find another journal and suggest it.
Admittedly I am not in the USA, but I am unclear on how $25k comes to your supervisor for your teaching. Is this because the Uni has to, essentially, "buy out" the time spent in the lab? If that is the case, the $25k is meant to offset the work you would be doing and may be earmarked specifically and only for salary costs. I'm having trouble coming up with a scenario where you being a TA somehow results in $25k for your supervisor to do whatever they want with. Maybe I am misunderstanding something.
All told, saying that your supervisor is behaving unethically is a serious allegation indeed. It is not one to be made lightly, certainly not about minor disagreements with no clear ethical violation. Doing so risks totally souring your relationship with the person who you depend on for co-authorship, support, and recommendations.
My PhD adviser...realized the publication cost was $800 [for Physical Review Letters] and now instead wants to publish in a significantly worse journal...because the publication cost is free.
"Physical Review Letters is perfectly OK with publishing their papers for free," source: https://academia.stackexchange.com/a/139304/22768.