Private Universities Should Stop Wealth-Hoarding and Share

Parents Forum
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@furrydog, I like your post.

I was watching John Oliver’s latest show and he talked about congressional fundraising. It costs so much to run for office and people aren’t donating out of the goodness of their hearts. Donors expect a return. It was a great show.

The hedge fund guys make the rules. They have more knowledge than congress people. They care more about their billions in tax breaks compared to those who don’t receive the tax breaks. Those who don’t receive the tax breaks don’t know what is going on and don’t care.

The greed is mind-boggling.

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http://www.pionline.com/article/20150709/ONLINE/150709886/irs-ends-hedge-funds-basket-options

The basket option loophole was closed.

Some of the same people came up with this loophole.

http://www.bloomberg.com/news/articles/2015-06-16/how-an-exclusive-hedge-fund-turbocharged-retirement-plan

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Well, sure.
But even if some iota of it makes its way into well-targeted research grants, that won’t happen before the money goes through a convoluted process of oversight and administration, which eats up some (probably rather large) percentage. Why not let the taxpayer donate it directly to Stanford instead?

One way or another, $400M of Phil Knight income is making its way through the US economy.
Who is making decisions over the taxable part of it? Do we want to leave 100% of the decision-making power to Congress? Or do we want to reserve some decision-making power for the taxpayer?

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@dstark , you make a very good argument for a flat tax with no deductions. That means the deductions you probably also take advantage of - mortgage interest, child tax credit, education credits etc. etc. Why should anyone else get a deduction if you object to Phil Knight’s contribution?

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TooOld4School, I don’t believe in a flat tax. Sorry.

I don’t take any of those deductions. Sorry.

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@HRSMom I was a high need white kid who went to Brown on an almost full grant. Brown is no loans, so I graduated with no debt. I am forever grateful to all the wealthy donors who gave to Brown and so made it possible for me to attend. I subsequently won a Gates Scholarship, so I’m grateful to that billionaire too.

I also feel morally bound to donate as much as possible to Brown so that other may attend. Indeed, my local state university would have cost me much more to attend than Brown thanks to financial aid.

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Here is one LAC’s response to the congressional inquiry regarding its endowment:

https://www.amherst.edu/system/files/media/AmherstCongressionalLetter_4%25201_16_FINAL.pdf

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Your gratitude and subsequent moral obligation are values many do not understand when it comes to use of money that they deem as taxable by government. Therefore, their gratitude mainly extends to government paying for things, even though the effect of government is often to make people dependent on government, while being many times less efficient and productive than a similar private endeavor.

Note how on this thread the contested issue is the IRS, i.e, government, does not get the money. This makes you, @widgetmidget, the classic “missing man” who is present in many errant economic analyses. In my view, the thread’s title is a flawed premise to the core. Why? Because it views sharing as something only done by government, the least efficient dispenser of money. On the other hand, it is economically undeniable that Brown chose to share its money with you. It is short-sighted not to be able to see that Brown’s activity is more akin to sharing than what government does…

Furthermore, you and countless others like you who benefit greatly from $billions in donations and from the schools being tax-free on endowments, then go on and become productive citizens that return the value many-fold, yet this thread does not even count you as a true you as a true beneficiary, as the title indicates - very shortsighted because you return so much more than an inefficient government program.

Fundamentally, the issue that moves me about your post is summed up in one word, freedom. Students, such as you, get assistance from schools to attend because you proved your merit, and you go on without ever needing the school again. However, you then come back and build the school up to give others the benefits you received. That is the essence of freedom - you are not shackled to the school or dependent on it after you leave and you are free to give money back.

In contrast, there are extremely few government programs (never found one actually) where the participants do not become dependent on said program or, simply after exhaustion, move on to another government program. The effect of government is not personal freedom, but “expectation” shackles where beneficiaries expect the public dole. Ergo, that is why government programs rarely shrink or become obsolete, even when they are ineffective. Brown and other schools do just the opposite type of expectation.

No doubt about it, in base economic terms, Brown makes much better use of the money than government could even dream of doing, and you are the perfect example that too many miss in their haste to give government more money under the false guise of sharing.

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The government gives Brown University grants that total over $100 million a year.

If the government is so bad with money, maybe the government should stop doing that. :slight_smile:

Johns Hopkins receives close to $2 billion a year in grants from the government. Does Johns Hopkins complain the government doesn’t know what it is doing with taxpayer money when the government gives money to Johns Hopkins?

Doss John Hopkins give the $2 billion back because the government is incompetent?

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Do you have a peer-reviewed source for that assertion? Or, perhaps some macro Economists data? :slight_smile:

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I think the economist is Rush. :slight_smile:

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^^the rock band? :smiley:

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Lol!

The band might have more knowledge about economics. :slight_smile:

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Raw data handily gives the answer.

Given the fact that government does not pay tax, then it is rather equivalent to Brown in that regard.

Looked at together, Brown has no debt relative to its endowment size indicates it is fiscally wise. In contrast, and the government has a $20 trillion debt and basically pay-as-you-go, regardless of the amount of money it collects. It is interesting to study government revenues and expenditures. They up go hand-in-hand and money is rarely paid toward lowering debt.

All these schools (Brown, Stanford etc.) are on better fiscal footing than the government and gives a better return because they actually can exist on the investment, while government always spends more than it knows it has. In economic terms, if one is supposedly spending money to benefit people, yet one never gets to the point where the investment and allocations allow for a return that allows for increased valuation of the principal, then you are practicing bad investments any way you slice it.

It you want one piece of data though to show how horrible government is in returns - if one took one’s own money for SS in 1985 and invested it in three value-based instruments and one savings account, the money today would return more than 5X what the government would be giving you today - and that includes taking into account all the drops in the stock market and drops in bond yields bonds over the longterm. And funny, SS is the one program that government touts as a success, even though its returns are worse than if all the money were put into a basic savings account at a bank. One has to actively work at being that bad of an investor.

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The Federal government doesn’t cut checks to JHU to cover its operating deficit, to buy cars for its professors, or to pay for the air conditioning bill in the libraries so the rare books don’t mildew.

If researchers at Hopkins who are working on cures for glaucoma or cancer apply for- and qualify for- research grants, which are funded by the Federal Government, that money is accounted for down to the last dollar and can’t be spent on anything besides the specific grant.

You know this of course. But it makes for nice sensationalism to talk about the government throwing money at private universities willy-nilly.

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@blossom,

I am not the one who says government doesn’t spend well and is horrible.

The government spends billions and billions of dollars supporting our universities and their research.

Yes. I do know.

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Yes, you would recoup more of your SS contributions if you invested privately. But that is not the entire point of SS. SS exists to provide a safety net to all.

A civilized society has some costs…

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The issue of the thread is university donations being a tax deduction for the entity giving the donation. Some are saying that government should tax the money, i.e., not allow the charitable giving deduction.

However, your research example is instructive in that it points out that the issue is one really of class warfare and jealousy, than of sharing. Sharing really is a smokescreen.

Note that people seem to have no problem with government giving (sharing, in their terms) general taxpayer money to universities in the form of research grants, which is totally free money with no taxes involved anywhere. However, they have a problem with donors giving (i.e., sharing) their private money with a university in exchange for a tax deduction…

Think about the warped logic - government can give taxpayers’ money to universities totally free of any taxes, but wealthy people should not be allowed to freely do the same thing, even though both government and the wealthy people actions are identical.

And just for the fun of it, who do you think would be the better investor, the person who knows how to be wealthy or government who never pays down its debt, regardless of how much money it receives? OK, rhetorical question, I know. Ergo, this has nothing to do with sharing, but of people not liking the money and the individual freedom of others to do what they want with their money.

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Dstark, you know better. Government doesn’t just give money to JHU (and similar) for the fun of it. They do so to fund medical research and so forth that the govt can’t do on its own. Example #3,401 of why you always shift goalposts midstream and why it’s frustrating to discuss things with you.

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It is not a safety net for all because one has to work, get a paycheck, and the money is taken from you. SS only applies to the employed, specifically the long-term employed.

Thus, instead of these being able to be better individual investors for themselves, government spends their money on other programs, as there is no SS account, and no SS monies anywhere; it is pay as you go. That is not a safety net, as the money was/is spent on other things other than investing for a future return; that is the legal definition of a scam. If you or I did that, we would go to jail.

A safety net is not dependent on others when you need it; that is the entire point of the safety aspect. For example, a savings account is a safety net because the money is there if one runs out of normal income. In contrast. the government is totally dependent on younger workers to pay SS - it is a transfer payment, not a safety net, as the government has not stored that money away as an investment for retirees.

Therefore, the cost to society is an increase in dependency. Instead of people being independent after working 40 years, they are 100% dependent on others paying their SS. That is not a good position to be in after working 40 years.