<p>^That’s not a bad thing. They could put their skills to something more productive than robbing from one and giving to others.</p>
<p>Ken Griffin is not stupid.</p>
<p>Busdriver11, sounds good but why would people give up some wealth and power? </p>
<p>In addition, govt spending has a bad name in many quarters. To get around this, we use tax deductions, tax credits, and we exlude some income and wealth from taxation. </p>
<p>It woukd be interesting. We get rid of all tax breaks and tax income the same. </p>
<p>The government would have its revenue.</p>
<p>Would the govt allocate an additional $1 billion in spending to Harvard to make up for the tax breaks Harvard lost?</p>
<p>If not, we know the Harvard tax breaks are bogus. They arent a priority.</p>
<p>We can speculate…</p>
<p>“sounds good but why would people give up some wealth and power?”</p>
<p>Politicians would never do that willingly unless they thought it helped them to maintain the power. If their constituency demands it, they would eventually (theoretically) have to do it to stay in office.</p>
<p>“It would be interesting. We get rid of all tax breaks and tax income the same.”</p>
<p>Most definitely. Nobody could ever have a complaint about the “rich” ducking taxes and not paying what they should. If there’s no way to hide it and all income is taxed the same, people would have to pay a reasonable percentage of income in taxes. Of course not the same tax rate, but on a graduated scale. All so easy, though of course the interest groups would flail and yell loudly. And probably a new industry would crop up and people would find a new way to reduce their taxes. But it would be transparent, easy, predictable, and completely fair.</p>
<p>There’s obviously plenty of options for that money that would provide more social good, I don’t think anyone can argue against that. Does that make it immoral? I don’t think so. If it is immoral, it’s no more immoral than someone using their money for some unnecessary luxury when that money could go towards greater social good, which is something we all do. The only reason this is being written about at all is because it’s such a large amount. </p>
<p>I don’t see how I’m injuring the government if I follow the incentives the government has itself set up. It’s not like Congress doesn’t know that universities get big tax-free donations. The government wants it this way. They have decided that they want to privilege certain kinds of expenditures over others. If they think they are getting ripped off, they can change the rule. It would be pretty easy to cap the deductibility of large donations, or define tax-exempt charities more narrowly.</p>
<p>I personally choose to give Harvard token annual amounts. I do this because, as an extremely satisfied and grateful alum, I want to be counted in this measure of alumni satisfaction. I agree that my charity dollar goes much further elsewhere. I am on the planning committee for my upcoming college reunion, but I declined the invitation to help lead the fundraising for just this reason.</p>
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<p>Something like that was tried in the 1980s, when people (including those in the government) realized the absurdity of having tax rates up to 70% that high income people avoided with numerous tax shelters. But decades of lobbying and legislation for various deductions, credits, exemptions, special rates, etc. have allowed the complexity of the tax laws to creep back up to the point that it is very complex for the amount of revenue it raises.</p>
<p>The “no raising taxes ever” lobbyist groups also interpret elimination of such deductions, credits, exemptions, special rates, etc. as “raising taxes”, making legislators fearful of eliminating even the most obviously special-interest features of the tax laws.</p>
<p>The 1986 Tax Reform Act lowered tax rates and eliminated many tax shelters that took advantage of paper losses derived from depreciation and other non-cash expenses. It did not, however, simplify the the tax code. It left most of the deductions, credits and exemptions in the code. Busdriver, is right; we need to sweep out all the clutter in the code and lower the tax rates for all income brackets. I also think it is a problem when half of our adult population do not pay federal income taxes. Real tax reform should fix this problem.</p>
<p>Goldenpooch: Best post on this thread.</p>
<p>I also think that gratitude is the motivation for a lot of donations to colleges. I do think, though, that there needs to be more scrutiny of the uses non-profits make of their endowments–I don’t really see why Harvard should get such big tax advantages if it doesn’t use the funds in its endowment. It would be financially painless for Harvard to make itself tuition-free for all students, for example. If it’s really a non-profit, why does it need to “sell” its product?</p>
<p>On the other hand, whatever charitable gifts one makes, there will always be somebody to argue that the money could be put to a better use.</p>
<p>Delete</p>
<p>Does the donor have children ready to apply to college? Maybe it is a simple development admission case.</p>
<p>" It would be financially painless for Harvard to make itself tuition-free for all students, for example. "</p>
<p>The painless part is debatable – each branch of Harvard owns its own portion of the endowment, even though it is managed together, and most of the funds are restricted to particular purposes and cannot legally be applied to other uses. But more importantly, going tuition-free would be a giant handout to a lot of very rich families, and would be IMHO a much less charitable/social-good-promoting use of the money than building science labs, etc. The current tuition discounting model, where you have to be earning close to $200k to pay full price, is one thing Harvard does exactly the way I think it should.</p>
<p>^^Not only is much of Harvard’s endowment heavily balkanized and restricted but also a lot of it is tied up in rather illiquid assets and investments, timberland for example. Which makes things very painful indeed when the cash runs short. Recall the cash flow problems they had back in the 2008-2010 time frame. Spendable cash got so tight that they nickled and dimed students to point of doing away with hot breakfasts in the dining halls. </p>
<p>Even in the flush years going tuition-free and thus forgoing the regular cash infusions of tuition payments would be financially very painful indeed.</p>
<p>Beyond issues of tax codes, what we have at some schools is the proverbial “hedge fund with an educational institution attached,” at some other schools it’s a “basketball/football team with an educational institution attached,” etc. There’s the danger of the tail wagging the dog. I’m not saying that it has happened at Harvard, but …</p>
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<p>Those households who actually have a working member but do not pay federal income tax are likely low income households who do pay other taxes, such as payroll taxes* and state and local taxes:
<a href=“http://www.cbpp.org/cms/?fa=view&id=3505”>http://www.cbpp.org/cms/?fa=view&id=3505</a>
Figure 4 says that, of those households who do not pay federal income tax, 61% are working poor who do pay payroll taxes, 22% are elderly (presumably the retired poor on Social Security), and 17% are students, unemployed, or with disabilities. Not exactly where you are going to find a lot of tax revenue if you tried to tax them more.</p>
<p>*The current payroll taxes function like income taxes, but only on labor income; the super-wealthy are likely to derive a greater share of their income from non-labor income that is not subject to payroll taxes.</p>
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I think this is a problem, too–it’s a problem when so many people don’t make enough money to justify charging them income taxes. However, I don’t think tax reform will fix this particular income inequality problem.</p>
<p>+1 to UCB and Hunt.</p>
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<p>Having a land-value tax instead of property, income, and capital gains taxes may spur growth, as it removes incentives not to build, not to hire, and not to invest. </p>
<p>Don’t want to stray too far from the subject of this thread, but with so many people paying no federal tax, there is the danger of having too many without skin in the game, where it is now all too easy to vote for more taxes as long as someone else pays the bill. Having low income people pay a nominal amount of tax would remind them there is a cost to expanding the federal budget. It is not healthy to have a society where a large percentage of the population receive benefits without paying for them.</p>