Over at Inside Higher Ed they’ve got a piece titled “Massachusetts Should Tax Harvard” taking the position that most of the arguments against taxing extremely wealthy institutions of higher education are nonsense. You have to read all the way to the last paragraph to get to the one really interesting suggestion, though:
Although I support taxing rich colleges, I believe there are better ways of doing it than through imposing a wealth tax on endowments. As Mankiw wrote to me, many economists believe it inefficient for governments to tax savings. I would prefer if Massachusetts imposed a sales tax on tuitions. Such a tax might appeal to politicians who don’t begrudge elite colleges their huge wealth but do feel the schools should spend more of their capital on students by, for example, charging low tuitions.
A sales tax on tuition? What the hell?
Presumably this means something more like the “luxury tax” in baseball, where high-tuition institutions pay a tuition-based tax, not like the normal sort of sales tax where families of students would need to pony up an extra percentage at payment time. It’d be really nice to have a little more detail on this. Or any detail, really.
Come on, IHE– you can’t let him tease us like that…
Sounds like a proposal for applying the sales tax to services as well as goods, along the lines of the Flat Tax proposed by McCain or the VAT used in Europe. Many states have looked at various ways of taxing services or businesses in the service sector, but AFAIK all have failed because businesses can (a) move and (b) buy legislators. Harvard can’t move so easily. Its library alone is keeping the state from floating away.
In all this, I only just realized that Massachusetts appears to be proposing a tax on actual assets, rather than a tax on income. I’m guessing that’s intended to be a one time tax, but I wouldn’t bet on it– I wouldn’t bet on the intent or on how long it lasts, really.
I’m not strongly opposed to universities with ginourmous endowments being taxed, but I had pictured it as a tax on endowment donations and investment returns, rather than just a confiscatory, “Nice job revenue collecting. It’s ours, now.”
(I’m also not sure off the top of my head if universities are already taxed in that fashion.)
Harvard can’t move so easily.
IANAL, but exactly what prevents Harvard (and MIT, who would also be affected by the proposed legislation) from establishing a Delaware corporation for the purpose of running the endowment? And how does Massachusetts expect to apply such a tax to a Delaware corporation? (Note: I mention Delaware because of its notoriously corporate-friendly business laws, but any state besides Massachusetts will do for purposes of this argument. It’s less than 30 miles from Cambridge to the NH border, for instance.)
I’m also not sure off the top of my head if universities are already taxed in that fashion.
They aren’t. They have nonprofit status. It can be argued, as you do, that they shouldn’t have that status, but they do.
The entire Harvard endowment should be confiscated by the Commonwealth of Masschusetts and donated to the poor. Next year, do it again. Social activism costs can be 100% amortized without undue incovenience to anybody as food can be burned for fuel to assure an inexpensive perpetual abundance of both.
http://www.globalvoicesonline.org/2008/04/23/japan-where-has-all-the-butter-gone/
There is no proven causal relationship between dairy farming and butter supply. The invisible hand of the marketplace is immune to faddist distortions.
We in Canada and Europe strongly support this measure to continue America’s transition into our less educated workforce.
Well, if you have a tax on services in general (VAT as noted above) then tuition is of course another service, along with cleaning, car repair or a root canal. If you don’t have a service tax, then treating tuition separately is of course ridiculous, but of you do, there’d be no reason to exempt it.
Presumably this means something more like the “luxury tax” in baseball, where high-tuition institutions pay a tuition-based tax, not like the normal sort of sales tax where families of students would need to pony up an extra percentage at payment time.
What, you don’t think the Universities wouldn’t tack this on to tuition? Like hell they wouldn’t. The students would end up paying it either way.
How do you mean the institution would pay the tax. That is a misleading statement. Much like corporate taxes. Corporations, I’m discussing actual corporations that provide goods and/or services, do not pay taxes. Consumers pay taxes.
You think IBM pays taxes. Nope the customers do. All costs of doing business get factored into the prices consumers pay.
A little closer to home, at least for me, is that the service members of the military do not pay federal taxes. Sure it shows up on our pay stub, but since that pay is coming from the federal government its isn’t like we actually paid anything.
This argument could be extended to say that no one actually pays any tax at all as no one actually prints their own money. Now maybe if you mined gold and have to give x percentage of the bullion to the government you could claim your being taxed, but the rest of us make a certain amount of money from some other source where our costs of living (including taxes) are factored in to how much we charge for that which we produce or provide.
TL;DR – No one actually pays taxes