Link: The Peril of Taxing Elite Higher Education
Summary: This is an editorial by Mankiw, the writer of our Econ textbook. He talks about the part of the recently passed tax plan that placed a tax on large university endowments. While he admits obvious potential conflict of interests (attended Princeton and MIT, works at Harvard, all have very very large endowments), he argues that the tax is unecessary, won't raise a whole lot of revenue, and is counter-productive. If Republicans and the government in general wants economic prosperity, the University system of the US must thrive, as higher education is becoming more important to learn the skills necessary to compete in today's job market. He finally argues that the tax likely stems from wanting to punish liberals, which those big-endowment schools tend to be seen as.
Analysis: Ultimately, for me, Mankiw points out that the tax won't have a huge impact on the colleges being taxed, and won't raise a lot of revenue for the government, and I think this illustrates that the tax is pretty petty. I think since the tax won't have a huge impact on the schools themselves, the government isn't really hampering or discouraging investment in "human capital" - really, this tax will raise little and negatively impact little.
That being said, I agree with Mankiw in that this is a cheap shot and a misguided one at that. While those big schools tend to be liberal, there are plenty of conservatives at them as well, and as it happens, higher education isn't just for liberals - conservatives also need a good education. I think the worst part of this tax is that it implies otherwise - and perhaps by doing so, implies that true "conservatism" can't or in the very least doesn't stem from those top schools with large endowments. Or, even worse, that true "conservatism", or at least Republicanism, stems from not having a higher education... and that's not the message the American people should get. Whether or not one agrees with the Republican party, it shouldn't be the party attacking higher education.
Questions:
1. Do you agree with Mankiw and myself? Do you think that this was just a petty tax aimed at liberals? Or do you think there is some merit behind it?
2. Depending on your previous answer, what do you think this says about the Republican party, and about their tax plan?
5 comments:
Because of the way that we Americans politically self-sort into certain areas and certain institutions, it is increasingly easy for a political party to pass laws that target the opposite party by targeting certain states and targeting higher education.
This was made astoundingly clear in the Republican tax bill. They passed multiple taxes on higher education, and also changed the mortgage interest deduction, moves that disproportionately affect liberal states and students.
Gabe, I totally agree that it is petty. And I agree that it is essentially saying "We don't value education, because our base is less likely to be college educated."
However, I think you can also see the education gap as reflecting poorly upon the Democrats as well. We position ourselves as the party of the working man, yet, demographically speaking, increasingly we are the part of well-educated and wealthy people. Our policies of providing universal healthcare, protecting the environment and, and being pro immigrant (without immigration, our population, and thus economy would contract) are in the best interest of rural and non-college educated Americans. But we have a messaging problem because even though are policies are in their best interest, we don't listen to them, and we don't value them like Trump says he does.
It seems that the Republican Party is compensating for their corporate and individual tax cuts and looking for revenue elsewhere. They do this by raising tariffs on foreign imports and, as you said, raising taxes on higher education. According to "The Harvard Crimson," (http://features.thecrimson.com/2017/senior-survey/national-politics-narrative/index.html) only 15 percent or so of the students there identify as conservative. Thus, it is safe to say that the Republican Party is taxing at liberals' expense, and doing so out of desperation. Their trade war with China as well as their attack on higher education reveal how flawed and imbalanced the current tax system is. As attractive as the tax cuts sounded for economic growth, they were shortsighted and are bound to lead the nation to more fiscal turmoil in the next year.
I agree with what Diana said that because they cut taxes on businesses and individuals they need to make money by taxing other things but I am not sure if this is an attack on liberals because while colleges are inherently more liberal because they aim for diversity in their students I think both conservatives and liberals value education. College is overpriced anyways so they know they can afford to pay the tax.
As you mentioned, the tax itself doesn't really do anything, so I"m not exactly worried about the effects that it may have. Honestly, everything in this nation is taxed so hard that I'm not exactly sure why it's such a big deal as to why taxing education endowments is such a big deal. However, I do think that the fact Republicans are willing to go out of their way to tax these colleges is kind of telling because they do chose to target certain people and areas, kind of reflecting their tendencies to target and antagonize people they don't agree with.
I do not think that this is a politically aimed tax. I think the government just wants more money to spend. There are some Conservative universities out there, and they are being taxed as well. I think this shows that the party has no idea what to do, if they out of all people, have resorted to taxing.
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