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Is It Time to Tax Harvard’s Endowment?

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Re: Is It Time to Tax Harvard’s Endowment?

#71

Post by bradleyjg »

justinlardinois wrote: post #62
bradleyjg wrote: post #49

Earlier quoted context omitted.

It's a little disingenuous to say it's easier though. Sure if you had someone with the same SAT scores, fencing prowess, IB classes, who also spent the summer prior to her senior year interning at the ACLU and was born and raised on Indian reservation in South Dakota she'd have a much easier time getting into Harvard than a wealthy student with a similar record who went to Phillips Exeter. But to put it mildly it wou…

> fencing prowess I'm admittedly unfamiliar with Ivy League culture. What does fencing have to do with your application?

The Ivy League has fencing as a D1 sport (except for men's fencing at Cornell which is club). Those eight schools make up about a third of the entire NCAA division.

Under the rule of the league they can't give out athletic scholarships, but they can, and do, recruit athletes and subject to a less rigorous admissions process.

Re: Is It Time to Tax Harvard’s Endowment?

#72

Post by waterlesscloud »

hackuser wrote: post #70
smeyer wrote: post #32

Earlier quoted context omitted.

Yes, Harvard disproportionately has many wealthy people compared to the population at large, but it also provides free educations to large numbers of people. Last I checked, the cutoff was around 60k (meaning, if your family makes less than 60k, Harvard will foot the entire bill). The challenge of overcoming this skew towards wealthy students has more to do with education in general and recruitment than the price tag…

One reason, at least, that they skew toward wealth is that they don't market themselves to others. Recent research has shown that the best poor students often have no idea that Harvard and other elite schools exist (as hard as that is to believe for most people on HN), much less that they might be accepted and afford to attend, and that they never apply. Remember that many of these students come from a world where fe…

I came from a middle class suburb outside Atlanta, and I had no clue where Stanford even was. Couldn't even have told you the state. I'd heard of it (mostly the physics program), but no idea what they were all about. I applied to top engineering schools, but at the time I wouldn't have put Stanford in the top 10.

I'd have been wrong, but I didn't know anyone who went there or even applied there, which counts for a lot. MIT, the Ivies, sure. Cal Tech and even Harvey Mudd. But not Stanford. No doubt it was a regional thing at the time, and it may well have changed by now.

Re: Is It Time to Tax Harvard’s Endowment?

#73

Post by dragonwriter »

Nrsolis wrote: post #68
chrisBob wrote: post #2

People give these elite colleges and universities a hard time, but I think it is mostly sensational stories with no meat. Do you know how many US schools are need blind and meet full need for all students? 6. [1] I also have no clue where the story about these schools being for rich kids came from. When my wife went to Princeton a few years back it was one of the cheapest options for her! Schools all base need on the…

This is just another attempt by those who think they have a better idea of how to use someone else's money. I'd rather see us start to question the "non-profit" status of lots of hospitals that pay their management some seriously hefty salaries. http://www.modernhealthcare.com/article/20140809/MAGAZINE/30...

> I'd rather see us start to question the "non-profit" status of lots of hospitals that pay their management some seriously hefty salaries.

Why? The salaries are taxed. (And salaries are a tax-deductible business expense even for non-exempt organizations.)

Tax-exempt non-profit status (while they are many subtypes with different qualifications) is mainly (in terms of the common feature of that status) about whether anyone has a claim on the retained earnings, not whether large salaries are paid.

(Charity status within the larger tax-exempt non-profit category -- charities, in addition to being tax-exempt, have contributions that are tax-deductible for the contributor -- is largely about serving one of a set of defined "charitable purposes".)

Re: Is It Time to Tax Harvard’s Endowment?

#74

Post by dkidd »

Animats wrote: post #37
Quanticles wrote: post #29

1. If you're going to tax universities, then you need to tax churches too. Good luck. 2. If you're going to tax non-profits, then why have non-profits? 3. Do we really want to penalize fiscally responsible organizations when even governments are going bankrupt? What values are we trying to support here?

"If you're going to tax universities, then you need to tax churches too. Good luck." Right. There are some very wealthy churches. In the United States alone, the Catholic Church has an operating budget of $170 billion. That's bigger than Apple.

I assume you're getting the $170 billion figure from this article: http://www.economist.com/blogs/newsbook/2012/08/catholic-chu...

I think it's worth noting that over $147 billion of that number is spent by Catholic hospitals ($98.6 billion) and universities ($48.8 billion). The number more representative of what most people mean when they refer to "churches" would be Parish disbursements ($11 billion). $11 billion is nothing to sneeze at, but when you consider that there are about 17.5k parishes in the US (many of which have schools) it's a less impressive number.

Re: Is It Time to Tax Harvard’s Endowment?

#75

Post by mikeash »

JoshTriplett wrote: post #69
mikeash wrote: post #64

Earlier quoted context omitted.

It's not an assumption, it's just fact. Normally you pay taxes on this stuff, but if you can register as an exempt non-profit as Harvard has, then you don't. That has the same effect as subsidizing Harvard by the amount they would pay in taxes. For the rest of your post, you seem to assume I'm holding some position or making some argument about the merits of the situation, which I'm not. I'm just trying to find out w…

You seem to be selectively ignoring the portions of my comments that you don't wish to respond to, even when they directly answer the question you're repeatedly asking. Re-posting and adding emphasis: There's the problematic assumption. As stated in my previous post, the public universities receiving taxpayer funds aren't paying taxes either . So the article compares universities paying no taxes and receiving no taxp…

I'm ignoring the portions of your comments that don't pertain to my question.

You seem to be under the impression that I'm taking a position on many things, when I'm not. At most I'm taking a single position: a tax exemption is in practice no different from a subsidy. And even that I'm putting in the form of a question because I admit I might be missing something.

Beyond that, I'm not making any statements. Policy changes? Treatment of public universities? The potential costs or benefits of taking away Harvard's status? All completely irrelevant to what I asked, and as far as I can tell based on the idea that I asked the question as some sort of submarine argument against tax breaks for Harvard and against private institutions of higher education, or something.

Re: Is It Time to Tax Harvard’s Endowment?

#76

Post by JoshTriplett »

mikeash wrote: post #75
JoshTriplett wrote: post #69

Earlier quoted context omitted.

You seem to be selectively ignoring the portions of my comments that you don't wish to respond to, even when they directly answer the question you're repeatedly asking. Re-posting and adding emphasis: There's the problematic assumption. As stated in my previous post, the public universities receiving taxpayer funds aren't paying taxes either . So the article compares universities paying no taxes and receiving no taxp…

I'm ignoring the portions of your comments that don't pertain to my question. You seem to be under the impression that I'm taking a position on many things, when I'm not. At most I'm taking a single position: a tax exemption is in practice no different from a subsidy. And even that I'm putting in the form of a question because I admit I might be missing something. Beyond that, I'm not making any statements. Policy ch…

> I'm ignoring the portions of your comments that don't pertain to my question.

To answer to your question yet again: "the net result is that you're raising taxes, but making it look like you're decreasing expenses instead." Removing a tax exemption is a tax increase, and granting one is a tax decrease; paying collected funds out is an expense, and not doing so removes an expense. They're on opposite sides of the balance sheet, and there's a meaningful difference between them even if the balance sheet adds up to the same value.

See previous comments for a more detailed explanation for why the way the article applies that particular spin comes across as "disturbing", which is what you specifically asked for an explanation of. You're not going to get an apolitical answer to that question, because it's a political question.

Re: Is It Time to Tax Harvard’s Endowment?

#77

Post by dalke »

JoshTriplett wrote: post #66
dalke wrote: post #50

Earlier quoted context omitted.

"To look at it another way, the private university provides what most people consider a "better" education without receiving any public funds; clearly we need more such institutions if possible." If Harvard were taxed, would it still provide better education? For accounting purposes, what's the difference between the non-profit status and a subsidy on the equivalent service provided by a for-profit company? Because I…

> If Harvard were taxed, would it still provide better education? To fewer people, and in particular to fewer non-wealthy people, most likely. That money has to come from somewhere. > Which is why I see this as a policy question - is it better to have one person with a "better" education at a private school, or use the same money to have two people receive a college education at a public school? Sure, it's a policy q…

"Sure, it's a policy question. That does not automatically make it government business"

We grant something non-profit status because we think it's in the public interest. Thus, it's already 'government business.'

"We have a set of tax laws about non-profits."

Certainly. And we change those laws over time to reflect changing circumstances.

"Yet governments people have no problem spending more money than they have"

That blanket statement is as true as the statement that companies have no problem spending more money than they have. I mentioned Cooper Union as an example of how non-profit universities are also not immune.

"That doesn't make it right."

Who am I likely to believe more, you or Piketty?

Re: Is It Time to Tax Harvard’s Endowment?

#78

Post by Nrsolis »

dragonwriter wrote: post #73
Nrsolis wrote: post #68

Earlier quoted context omitted.

This is just another attempt by those who think they have a better idea of how to use someone else's money. I'd rather see us start to question the "non-profit" status of lots of hospitals that pay their management some seriously hefty salaries. http://www.modernhealthcare.com/article/20140809/MAGAZINE/30...

> I'd rather see us start to question the "non-profit" status of lots of hospitals that pay their management some seriously hefty salaries. Why? The salaries are taxed. (And salaries are a tax-deductible business expense even for non-exempt organizations.) Tax-exempt non-profit status (while they are many subtypes with different qualifications) is mainly (in terms of the common feature of that status) about whether a…

There is a lot of anecdotal evidence that some non-profit hospitals misuse their tax-advantaged status to benefit a very select group of individuals at the top of the management hierarchy.

Again, if the states managed their money better, they wouldn't need to try and take the money that these educational institutions have amassed to secure their own mission. These schools manage their endowments very well because it's the only thing that provides them a measure of security in a very uncertain world.

We should not be looking for new ways to hand politicians money. They've done a decidedly poor job thus far with the funds they've been entrusted with.

Re: Is It Time to Tax Harvard’s Endowment?

#79

Post by JoshTriplett »

dalke wrote: post #77
JoshTriplett wrote: post #66

Earlier quoted context omitted.

> If Harvard were taxed, would it still provide better education? To fewer people, and in particular to fewer non-wealthy people, most likely. That money has to come from somewhere. > Which is why I see this as a policy question - is it better to have one person with a "better" education at a private school, or use the same money to have two people receive a college education at a public school? Sure, it's a policy q…

"Sure, it's a policy question. That does not automatically make it government business" We grant something non-profit status because we think it's in the public interest. Thus, it's already 'government business.' "We have a set of tax laws about non-profits." Certainly. And we change those laws over time to reflect changing circumstances. "Yet governments people have no problem spending more money than they have" Tha…

> Certainly. And we change those laws over time to reflect changing circumstances.

Which would be quite different from the article's positioning that acts entitled to that money in the first place. But at that point, it would be reasonable to ask why such a change should target non-profit educational institutions in particular, rather than non-profits in general. (Obvious answer: because that would be wildly unpopular, and would threaten some of the primary organizations that non-profit laws were created for, which have enormous lobbying power.)

> That blanket statement is as true as the statement that companies have no problem spending more money than they have.

And those companies doing so typically go out of business, which is strong encouragement not to do that. Government departments have no such controls or requirements in place to enforce fiscal responsibility; when they spend more than they have, they still get more to spend in the future. And lo and behold, they often demonstrate extreme fiscal irresponsibility.

> I mentioned Cooper Union as an example of how non-profit universities are also not immune.

And they very nearly went under due to (as far as I can tell) epic mismanagement, yes. Mismanagement occurs in many places. It's worse when it happens with other people's voluntarily donated money, and even worse when it happens with taxes.

> Who am I likely to believe more, you or Piketty?

I'm hardly the first or only person to argue against what is commonly euphemized "wealth redistribution" on moral/ethical grounds. Whether you're inclined to believe those arguments depends rather heavily on your political beliefs and morals, as it's a question not solely decidable based on economics. Sounds like you've already made up your mind that "wealth redistribution" is acceptable to you, which is a political viewpoint, not solely an economic one.

Re: Is It Time to Tax Harvard’s Endowment?

#80

Post by dalke »

JoshTriplett wrote: post #79
dalke wrote: post #77

Earlier quoted context omitted.

"Sure, it's a policy question. That does not automatically make it government business" We grant something non-profit status because we think it's in the public interest. Thus, it's already 'government business.' "We have a set of tax laws about non-profits." Certainly. And we change those laws over time to reflect changing circumstances. "Yet governments people have no problem spending more money than they have" Tha…

> Certainly. And we change those laws over time to reflect changing circumstances. Which would be quite different from the article's positioning that acts entitled to that money in the first place. But at that point, it would be reasonable to ask why such a change should target non-profit educational institutions in particular, rather than non-profits in general. (Obvious answer: because that would be wildly unpopula…

"strong encouragement not to do that"

I would expect that if governments had the same fiscal responsibility as businesses then they would have about the same failure rates.

The failure rate in companies that end up with the investors losing money or some other form of debt is, what, 30%? (Number is from 'Redefining Business Success: Distinguishing Between Closure and Failure', Headd (2003)).

If governments had the same failure rate as businesses we would be up in arms. Yes, some city governments are bankrupt, but it's not true that even 10% of them are failures. http://www.governing.com/gov-data/municipal-cities-counties-... says it's more like 1:2000.

That is not a sign of 'extreme fiscal irresponsibility'.

"Sounds like you've already made up your mind that "wealth redistribution" is acceptable to you, which is a political viewpoint, not solely an economic one."

You make it sound like political viewpoints should not be a consideration.

The existence of non-profit status, the choice of what can be non-profit, and the rules that apply (eg, the 5 percent payout requirement for foundations) also also influenced by politics.

Since you appear to support special non-profit status for schools, you and I are in agreement that political views are indeed an important aspect of this discussion. I therefore don't understand why your comment is useful.

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