I was told planting grass under my tree was a bad idea because the grass would soak up all of the water and dehydrate the tree. Haven't heard this before, is it true?

I have this river birch in the back yard and I'm wondering what to do with it. At first I was going to just plant some grass beneath, but I was told that would hurt the tree. So maybe just a small ring of mulch with some nice edging stones and call it a day? Maybe trim it a little in some spots?

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