Re: Guest Post - tax breaks for Universities

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Can anyone think of a single example where conservative support for the proposition "we should support [liberal goal] through a different, more efficient mechanism" survived the abolition of the already established mechanism? Because I can't. EITC, TAA, Section 8 vouchers, not to mention the carbon tax and the individual mandate. You could make a long list of the examples of bad faith in these matters.

Liberals play the same game - replace soybean price supports with direct cash assistance to farm families! Everyone understands the political advantage of funneling public money to your favored constituents through obscure regulations or tax provisions, while making support for your opponents' constituencies transparent.


Posted by: knecht ruprecht | Link to this comment | 07-11-13 6:53 AM
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Yeah, really, I have my doubts about the likely net benefit of any plan that starts with "let's eliminate this benefit."


Posted by: redfoxtailshrub | Link to this comment | 07-11-13 6:57 AM
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Cities have recently begun to implement PILOTs (Payments in Lieu of Taxes) with some universities and other large nonprofits (eg hospital systems). These are negotiated payments, not mandated, but get to the same general issue.

To the OP, my sense is that any attempt to change the status would result in a big game of musical chairs, as savvy large universities created new nonprofit subsidiaries and transferred ownership of properties to those subsidiaries, while smaller ones got caught in the gears. But I'm a grouch today, so take that with a grain of salt.


Posted by: Witt | Link to this comment | 07-11-13 6:59 AM
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I agree with one, but only because nobody is taking swings at corporate tax breaks.


Posted by: heebie-geebie | Link to this comment | 07-11-13 7:37 AM
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1.1: A huge one is mental health deinstitutionalization.

But what was EITC meant to replace? I thought of it as sort of a new thing. Or did it pave the way for welfare reform later?


Posted by: Minivet | Link to this comment | 07-11-13 8:33 AM
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Relatedly, coming soon to a university health plan near you:

http://afscme3800.org/afscme-talking-paper-2-health-insurance-university-minnesota


Posted by: Natilo Paennim | Link to this comment | 07-11-13 9:07 AM
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But what was EITC meant to replace? I thought of it as sort of a new thing. Or did it pave the way for welfare reform later?

The history of it is convoluted, like every other feature of the U.S. welfare state. It's correct to say that it was not originally intended to replace anything - it was a very tentative instantiation of the idea of a negative income tax, which was popular among conservatives in those days and blessed by no less an authority than Milton Friedmann. During the Reagan and Bush I years, expansions of the EITC were explicitly cited as a reason for not increasing the stagnating minimum wage. Clinton subsequently positioned EITC as a superior alternative to AFDC (welfare), which, in fairness is not completely wrong.

In any event, conservatives pretended to love EITC until welfare was gutted, at which point it became an indefensible boondoggle. We've seen this movie before, and the ending makes me want to cry every time.


Posted by: knecht ruprecht | Link to this comment | 07-11-13 9:41 AM
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I remembered, after sending this in, that my grandparents who worked at a small college in Ohio hated Harvard, a little bit, for the amount of money that it had to throw around.

I agree with 1, that cutting the tax break would, ultimately, reduce funding available to most colleges and universities. But I also suspect that, like the mortgage interest deduction, the largest benefits go to the people who least need support.

It would be nice if government support reduced the resource disparity between institutions rather than exacerbating it.

And a pony.


Posted by: NickS | Link to this comment | 07-11-13 10:37 AM
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It would be nice if government support reduced the resource disparity between institutions rather than exacerbating it.

I'd aim for reducing the resource disparity between people (which will often, but not always, line up with that between institutions).


Posted by: clew | Link to this comment | 07-11-13 10:40 AM
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And a pair of ponies! With feathers on their heads!


Posted by: clew | Link to this comment | 07-11-13 10:40 AM
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Ponies are dinosaurs.


Posted by: JP Stormcrow | Link to this comment | 07-11-13 10:55 AM
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Semi-on-topic: what if students paid for public university education through a percentage of their future income? What a radical idea! Or, you know, we could just make public universities free, and fund them through, I don't know, progressively taxing income. It's so crazy that it just might work!


Posted by: x.trapnel | Link to this comment | 07-11-13 11:33 AM
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I agree that we definitely shouldn't simplify the tax code without taking care of all the other stuff that's done by tax breaks, just like how we should throw out most of the farm bill but not the food stamps. But on the other hand, don't other countries manage to navigate this minefield better than the US? I think some do, or have in the past. I remember one or two early-to-mid-April comment threads where UK commenters couldn't understand what we were all going through. Is the problem because other countries have put their legislative veto points in better places, or their culture idolizes the free market less, or both, or what?


Posted by: Cyrus | Link to this comment | 07-11-13 12:47 PM
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The US taxes foreign assets. Almost no other country does this. Outside the US, it is much, much easier to cheat on taxes than for Americans. Consequently, foreign tax codes can be and are much simpler. Tax dodges extend all the way down to the middle class elsewhere rather than being the exclusive province of the extremely rich as they are here.


Posted by: lw | Link to this comment | 07-11-13 12:55 PM
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What?


Posted by: Moby Hick | Link to this comment | 07-11-13 12:56 PM
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Oh, on the OP, I'm with kr in 1.

Transparency and simplicity are great in a world of procedural liberalism and fair play. That world's not the US this year.


Posted by: lw | Link to this comment | 07-11-13 1:01 PM
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I have no idea about foreign tax dodging and I assume the U.S. does better at collecting taxes than Greece or Italy, but that seems unpossible. The self-employed portion of the middle class has made declaring income into an art.


Posted by: Moby Hick | Link to this comment | 07-11-13 1:01 PM
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12: I've seen that idea getting more play lately for some reason. It's not insane (the percentage of future earnings plan, not the progressive income tax, which is also not insane but which is not that to which this sentence refers). I prefer it to the go-into-massive-debt approach currently in play, and it's nice from the standpoint of effectively subsidizing the more artsy side of things.


Posted by: togolosh | Link to this comment | 07-11-13 1:01 PM
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14 to the first sentence of 13. Other countries have simpler tax codes because the tax codes there are poorly enforced and intentionally porous.

In the US, the tax code is kept complex so that legal tax avoidance is possible for the very rich and political donors, but not for others.

To the OP, the idea is BS as a useful improvement for the US, but a great column for Felix Salmon. Something complicated and irrelevant to discuss.


Posted by: lw | Link to this comment | 07-11-13 1:09 PM
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17. Foreign tax dodging is the reason Switzerland is wealthy. Not easy for Americans, as it's necessary to lie or set up elaborate trusts to hide funds offshore.


Posted by: lw | Link to this comment | 07-11-13 1:12 PM
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Those types of dodges are middle class activities in France?


Posted by: Moby Hick | Link to this comment | 07-11-13 1:16 PM
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Americans dodge taxes like this, whereas topless enlightened Europeans dodge taxes like this.


Posted by: x.trapnel | Link to this comment | 07-11-13 1:35 PM
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Well, Switzerland can be a day trip from most of France.


Posted by: clew | Link to this comment | 07-11-13 1:35 PM
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Time magazine had a chart reflecting % GDP that is illegally untaxed. US is 8.6%, Switzerland 8.5%, Germany 16%, Korea 26.8%, Italy 27%, Greece 27.5%. Mexico 30%. Source World Bank 1999-2007. The accompanying text suggests that USians pay out of moral obligation due to religiousity. Ick.


Posted by: ydnew | Link to this comment | 07-11-13 1:47 PM
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I think lw's point is largely exaggerated or wrong. "Foreign tax dodging" is not in any meaningful sense why Switzerland is wealthy. Wealth in Swiss Bank accounts is not generally from middle class europeans. Also, a simpler tax code does not make a tax code easier to dodge -- it's generally the reverse. It's true that the US is more aggressive in going after income squirreled abroad than some other rich countries are, but of course those countries also have much higher rates of taxation of individuals and the wealthy, in particular, generally have a higher tax burden.


Posted by: Robert Halford | Link to this comment | 07-11-13 1:48 PM
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21: No, they mostly drive Peugeots and Citro├źns.


Posted by: Natilo Paennim | Link to this comment | 07-11-13 1:59 PM
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26 to 21 or 23.


Posted by: clew | Link to this comment | 07-11-13 2:26 PM
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"Foreign tax dodging" is not in any meaningful sense why Switzerland is wealthy. Wealth in Swiss Bank accounts is not generally from middle class europeans

You'd be surprised. I'd substitute "bourgeois" for middle class - but German* dentists, lawyers, mittelstand executives, basically the Merrill Lynch branch customer demographic, stashing cash in Switzerland is very much a thing.

*synecdoche for north-ish European here.


Posted by: Alex | Link to this comment | 07-11-13 2:49 PM
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I think we have too many non-profits in the US. That said, I'm opposed to eliminating non-profit status of universities until after the same is done with churches.


Posted by: Unfoggetarian: "Pause endlessly, then go in" (9) | Link to this comment | 07-11-13 2:49 PM
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28 -- You may be right, and I admit that I don't have much direct knowledge of the extent of hiding funds in swiss bank accounts by professional Germans.

However, I still think the more general point -- that a simpler tax code leads to more tax evasion -- is dead wrong. Simpler tax codes are, if anything, simpler to enforce. And I strongly suspect that even with substantial tax evasion the de facto tax burden on professionals in Germany is substantially higher than that in the United States.


Posted by: Robert Halford | Link to this comment | 07-11-13 3:12 PM
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We don't have too many "non profits." We may, and I think do, have way too generous tax treatment for charitable donations. As I mentioned the last time this came up, I generally support not taxing "income" to non-profits from non-commercial activity (because it's notoriously hard to figure out what that would be) but I am very much in favor of eliminating the charitable donation tax deduction and also in favor of enforcing property and other local use taxes against nonprofits.


Posted by: Robert Halford | Link to this comment | 07-11-13 3:15 PM
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29 -- Next year in Jerusalem. Or, from your mouth to God's ears.


Posted by: clew | Link to this comment | 07-11-13 3:19 PM
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In the US, people mostly don't evade taxes. If they have enough money they do what Mitt Romney did and set up complex networks of trusts. The complexity of the US tax code allows the extremely wealthy (which includes corporations) to engage in tax avoidance (unnecessary loans, capital appreciation rather than income, weird business and inheritance structures) different morally than tax evasion due to uh some reasons. In other countries, tax evasion is an option so people mostly do not bother with avoidance, though I believe speculatively that corporations do.

The US arrangement benefits both politicians who receive donations and the very wealthy. My claim is that other places, people bribe and cheat more-- here, instead, the tax rules are constantly being rewritten and negotiated so there are more of them.


Posted by: lw | Link to this comment | 07-11-13 7:49 PM
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Unless you count buying a house as evading taxes...


Posted by: Unfoggetarian: "Pause endlessly, then go in" (9) | Link to this comment | 07-11-13 9:36 PM
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Dinosaur slash dark matter fanfiction.


Posted by: JP Stormcrow | Link to this comment | 07-12-13 6:28 AM
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Oops (but maybe I put here as a diversion...).


Posted by: JP Stormcrow | Link to this comment | 07-12-13 6:28 AM
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34: All the poor people waste money on rent.


Posted by: Moby Hick | Link to this comment | 07-12-13 6:30 AM
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