@HRSMom I like your comment that you think it preferable not to involve the government. What are you doing then when you propose to effectively seize and redistribute the income of wealthier universities?
As someone who went to a “wealthy” university on financial aid and now makes significant donations, I also would stop donating if I thought my money was being diverted to some other place. I’m sure many other alumni feel the same way. The rich universities have become that way though generations of donations…all made in the expectation that they would be used by the university to whom they were made. It is not our fault that another university is less well off. As for STATE universities, if they lack resources, that is the responsibility of the voters in their states. If like Californians those voters decide to bankrupt their universities and public institutions, that is not our responsibility.
Any attempt to “redistribute” wealth would also have a chilling effect on charities and other institutions. Why stop at Harvard? Why not redistribute the wealth of Care or the American Cancer Society to less wealthy ones, or money from the Metropolitan Museum of Art to the Podunk Art Museum.
I guess I take some reassurance from the fact that legal experts seem to be agreed that any effort to redistribute endowments or endowment income would be unConstitutional. I agree that higher education finance needs reform. But not by taking the money that thousands of people have donated over the years.
Don’t kid yourself. You should not take too much reaasurance, as it is not unconstitutional. Govt does it every day…they are called excise taxes.
I’m not a fan of govt, as it makes everything cost 2ce as much…I’m glad you were able to get a free weathy education. But don’t you think schools should spend more time trying to figure out how to provide it to more kids, not just the ones lucky enough to get into their school?
Which then leads to companies and wealthy people taking their money elsewhere in the world, where such taxes do not exist. So the effect is everyones loses, as the universities do not get the donation and society has fewer jobs, i.e, a smaller job base that it should have.
People need to recognize that communism and socialism economy policies really are just one big excise tax on people’s activities with their money. How good are those countries in producing wealth and stability? Not very, unless you are an aristocrat or government-connected from birth.
“But don’t you think schools should spend more time trying to figure out how to provide it to more kids, not just the ones lucky enough to get into their school?”
Private universities? No, I don’t think they have any such obligation other than to their own mission and their own student body. It’s wise for them to be “good neighbors” to their community, and plenty of elite universities situated in or near cities have programs to provide opportunities to the underserved in their cities, but really, if a private university wishes to use unrestricted donations to build gold-plated dorms, that’s their prerogative.
The biggest logic flaw in this thread is the straight line connection people are falsely making between taking money from wealthy universities and the betterment of less wealthy universities by first giving the money to government.
When has government shown to be honest and has spent money the things it says to collects the money for? Same thing would happen here and the less wealthy universities would stay that way or decline further.
Bridge tolls were to pay for bridge upkeep, yet the same bridges are in disrepair because the money gets diverted into other programs.
The same diversion as in #1 above goes for highway tolls.
SS contributions are not spent on SS.
Etc.
My guess is any money taken from wealthy universities would be used to prop up public employee pension fund liabilities. Why? Because even there the government did not spend the pension contributions on actual investments for the pensioners, so they are short and need something to kick the can down the road again.
It befuddles me why people keep giving money to an entity, which hoses them every chance it gets. It is as if they are asking to be hosed by going back and doing it again even though they know they will be conned. Fascinating behavior.
I don’t think you need to worry about smaller job base. Apparently, elite schools don’t add much to the labor market. You will get more bang for the buck if you put it in State Us.
Taxing endowments is very different from re-distributing them, which was the point of my post (which you didn’t bother to read). I also note that of the score of such “tax reforms” that have been proposed, none have got beyond Committee. I’m willing to bet these proposals will never leave committee, let alone make it to the floor of Congress. They are inequitable. Any why stop at universities; why not re-distribute wealth?
@bluebayou I love how almost every one of your posts contains some snide remark. Really impressive even if few of your snide remarks are very clever.
@Iglooo I don’t believe I said anything about job creation or where the graduate of elite universities get job. I’m frankly not worried about that; their graduates don’t very well. I simply stated that alumni (and donors) will not give if they think their money will be re-directed.
As for the state of public universities, that is another issue. I agree that public universities are underfunded. But that is the responsibility of voters and legislatures.
@widgetmidget why be so snarky? I read your post. You cant seize property. It would have to be through excise taxes or taxing contributions and endowment earnings. I think you are taking this too personally. I personally don’t think it “should” be done, but at the same time, the inequalty of FA between schools is shocking. And that is worth discussing!
@HRSMom I apologise, I didn’t mean to be snarky. I still think what you propose is utterly unfair to all those who have donated to the “wealthy” universities. How are they responsible for the fact that other universities are under funded?
As far as financial aid is concerned, Barnard College isn’t wealthy. It’s endowment is only $300 million. Yet it is need blind, meets the full need of students, and more than 20% of its students receive Pell Grants. It just prioritises financial need. I see now reason other colleges cannot do so. And it is ultimately up to taxpayers to decide whether or not to finance higher education.
@HRSMom I doubt the Ivies are worried. Look at how many members of Congress went to Ivy League universities. How many Congressmen have children or grandchildren at Ivy League colleges. How many want their kids to go to them. They aren’t going to impose excise taxes on the Ivy League colleges. Indeed, federal research funding has increased in recent years.
It’s also worth noting that Trump, Cruz and Clinton all went to Ivy League or Top Tier universities, and all make ritual visits to them. I’m not saying this is right but it is reality.
I’m not really proposing anything. I just wish things were a bit more equal. Wealth inequality is one thing. If everyone has the same starting chance, I’m ok with that. But FA inequality makes me question that equal starting point, and my own political beliefs at times.
Taxpayers are funding the richest schools. I don’t think a majority of taxpayers really decided to do that. That is not how the world works. People in power decide how the tax structure is going to work. For example, That is why capital is taxed at much lower rates than labor. That is why we have carried interest. Most taxpayers don’t even know what carried interest is. The heads of private equity and hedge funds know.
The public doesn’t know about non profit foundations and the basis of capital is adjusted when you give an appreciated asset as a charitable deduction.
The average income tax rate for the wealthiest people in this country is 22 percent. Because some income is not included, the average income tax rate paid is really less than 22 percent. The public sees the top income tax rate is 39.6 percent and thinks the wealthy are paying that.
@dstark Indeed the public are funding the wealthiest universities. Harvard receives a massive amount of federal research dollars, federal development dollars, and federal student aid (Pell Grants). So do Yale, Columbia, Michigan, UVA, Duke, Berkeley etc. I’ve sat on NSF committees awarding federal money and we were proud of how much research we funded at these universities.
As for the public not knowing, we hear this all the time. But we live in a country where the public is happy to re-elect most sitting legislators. And the public has repeatedly elected Presidential candidates pledged to cutting taxes on the wealthiest.
If the public doesn’t know it is because they don’t want to know. But I also question whether you have any claim to speak for most Americans. You’ve stated your opinion but that is all it is.
When it comes to earned income, the wealthy are paying that top rate of 39.6%, plus 3.8% on Medicare (compared to 2.9% for everyone else). Deductions are also phased out as income increases. Add in state income taxes, and it is very easy to get marginal tax rates above 50%.
There is a very good reason why capital is taxed at lower rates than labor. Compensation for labor is virtually guaranteed. You rarely hear of people not getting paid for hours worked. But when it comes to capital, a person can lose 100%, but can only deduct $3000 per year. However gains are immediately taxed on the full amount of gain, not just the real gains after inflation. Given the possibility of 100% loss, inability to deduct losses, and taxation on gains due solely to inflation, it would be silly to have the same tax rates for labor and capital.
I agree with you on the carried interest though. That loophole should be removed.
