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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?

#81

Post by JoshTriplett »

dalke wrote: post #80
JoshTriplett wrote: post #79

Earlier quoted context omitted.

> 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 sa…

> If governments had the same failure rate as businesses we would be up in arms.

So governments should take less risks, and in particular incur even less debt.

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

I'm not talking about failure rates, I'm talking about utter failure to spend within means, or even recognize a boundary of means.

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

Not at all; rather, I was suggesting that citing one economist to support a political viewpoint doesn't make that viewpoint right, and in particular doesn't provide any evidence whatsoever about whether that viewpoint is ethically right.

> Since you appear to support special non-profit status for schools

I wasn't taking a stance on that here; rather, I was suggesting that it doesn't make sense to specifically call out private universities for consideration of revoking that status, without broader consideration of non-profits in general, simply to prop up public universities. More specifically, I was complaining about the entitled stance taken in the article.

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

#82

Post by dalke »

JoshTriplett wrote: post #81
dalke wrote: post #80

Earlier quoted context omitted.

"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 sa…

> If governments had the same failure rate as businesses we would be up in arms. So governments should take less risks, and in particular incur even less debt. > That is not a sign of 'extreme fiscal irresponsibility'. I'm not talking about failure rates, I'm talking about utter failure to spend within means, or even recognize a boundary of means. > You make it sound like political viewpoints should not be a consider…

"I was suggesting that citing one economist ..."

My comments are a reply to your earlier statement "Looking at tax you wish you could collect but have no legal right to and salivating over it makes as much sense as looking at the contents of someone else's bank account and wishing it was yours."

I pointed out that there are countries where this is a legal right, and where there are people who believe it makes sense. (With the proviso that it appears to contribute to capital flight, so requires a global wealth tax; which Picketty believes is more Utopian than politically achievable.)

Certainly the utility of such a law is up for debate, but your starting position was that the idea was beyond the pale, which is not correct.

"it doesn't make sense to specifically call out private universities for consideration of revoking that status, without broader consideration of non-profits in general"

Page 2 of the commentary does consider that point. I quote:

> A tax like Schneider’s would still raise other philosophical and logistical questions. For starters, why tax giant endowments at colleges but not other nonprofits? The Metropolitan Museum of Art in New York commands a roughly $3 billion endowment—it’s hard to think of a coherent reason why it should escape the Internal Revenue Service if, say, Fordham University in the Bronx (endowment: $675 million) can’t.

It then mentions two other difficulties with the idea ("why take a cut of wealth from colleges when we don’t do it to individuals?" and "unintended consequences").

It may not cover it in the depth you want, but that's hardly reason to say that it doesn't consider non-profits in general.

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

#83

Post by smeyer »

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…

Harvard tries to recruit these students, but obviously isn't doing a good enough job of it. As a Harvard alum, this is somewhere that I'd particularly like to see them improve in terms of undergraduate education. When a majority of students are on financial aid, I don't think it's fair to say that "few will take it". Also, Harvard's graduation rates are so high that even if failing and dropping out are much more common among particular demographic groups, the graduation rate is still extremely high across the board (some would claim that it's too high and indicative of the extent of grade inflation.) There's a general philosophy at Harvard that while it may be hard to get in as an undergraduate they'll do everything they can to make sure you graduate.

>Amherst has gone a long way toward solving these problems

They have, but I don't think they have a massive lead over Harvard. If I recall correctly, both have similar aid profiles, are giving aid to a similar percentage of their students, have a similar percentage from low-income families, and have a similar percentage of students of color. I believe the graduation rates are also similar. Amherst has been a real leader in this area, so I'm sure there are areas where they're leading Harvard, and please let me know if my memory (or bias) is deceiving me or my information is out of date.

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

#84

Post by mikeash »

JoshTriplett wrote: post #76
mikeash wrote: post #75

Earlier quoted context omitted.

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 bal…

"Because it's a political question" sounds to me like a roundabout way of saying that there is no actual difference, and it's just "disturbing" because the wording you're against disagrees with your particular ideology in some way.

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

#85

Post by punee »

mikeash wrote: post #59
punee wrote: post #58

Earlier quoted context omitted.

You only need to read the second sentence of his post. It couldn't be any clearer.

That doesn't explain what the difference actually is, merely a perceived consequence of mixing it up.

That's because you're being unnecessarily obtuse. It's fairly obvious what the difference is between not being compelled by the government to give $500,000 you have earned, and being given $500,000 worth of taxpayer money.

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

#86

Post by mikeash »

punee wrote: post #85
mikeash wrote: post #59

Earlier quoted context omitted.

That doesn't explain what the difference actually is, merely a perceived consequence of mixing it up.

That's because you're being unnecessarily obtuse. It's fairly obvious what the difference is between not being compelled by the government to give $500,000 you have earned, and being given $500,000 worth of taxpayer money.

So you say. But if the net result is the same, then is there any actual difference, or just ideologues being upset because they want people to think of them differently?

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

#87

Post by JoshTriplett »

dalke wrote: post #82
JoshTriplett wrote: post #81

Earlier quoted context omitted.

> If governments had the same failure rate as businesses we would be up in arms. So governments should take less risks, and in particular incur even less debt. > That is not a sign of 'extreme fiscal irresponsibility'. I'm not talking about failure rates, I'm talking about utter failure to spend within means, or even recognize a boundary of means. > You make it sound like political viewpoints should not be a consider…

"I was suggesting that citing one economist ..." My comments are a reply to your earlier statement "Looking at tax you wish you could collect but have no legal right to and salivating over it makes as much sense as looking at the contents of someone else's bank account and wishing it was yours." I pointed out that there are countries where this is a legal right, and where there are people who believe it makes sense.…

> With the proviso that it appears to contribute to capital flight, so requires a global wealth tax; which Picketty believes is more Utopian than politically achievable.

Or perhaps it's not politically achievable specifically because there are enough people who would consider it dystopian instead, which is precisely why those people would "contribute to capital flight" if such a tax was passed.

> Certainly the utility of such a law is up for debate, but your starting position was that the idea was beyond the pale, which is not correct.

I find it "beyond the pale" that what to do with other people's money is "up for debate" by anyone. My position remains that taxing an endowment is at least as unacceptable as taxing wealth in general (which, fortunately, there's significant opposition to), if not even more so because the endowment is intended specifically for charitable purposes.

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

#88

Post by JoshTriplett »

mikeash wrote: post #84
JoshTriplett wrote: post #76

Earlier quoted context omitted.

> 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 bal…

"Because it's a political question" sounds to me like a roundabout way of saying that there is no actual difference, and it's just "disturbing" because the wording you're against disagrees with your particular ideology in some way.

You're being either intentionally or unintentionally obtuse, and I think anyone who is inclined to actually seek and hear an answer to your question already has it.

The entire point was the spin being used by the article. It doesn't matter if the result would be the same, because this branch of the discussion was never about the result, but the positioning/spin.

I certainly hope that your value function has terms in it for more than just "how much money changes hands at the end of the day"; the ethics used to lay claim to that money matter rather more.

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

#89

Post by hackuser »

smeyer wrote: post #83
hackuser wrote: post #70

Earlier quoted context omitted.

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…

Harvard tries to recruit these students, but obviously isn't doing a good enough job of it. As a Harvard alum, this is somewhere that I'd particularly like to see them improve in terms of undergraduate education. When a majority of students are on financial aid, I don't think it's fair to say that "few will take it". Also, Harvard's graduation rates are so high that even if failing and dropping out are much more comm…

> When a majority of students are on financial aid ...

A bit of a tangent: It also depends on how financial aid is defined. Many schools set an arbitrary price that very few students actually pay, the equivalent of a 'manufacturers suggested retail price'. In one NY Times story on this topic, at the school they looked into around 1% (IIRC) paid the MSRP; everyone else got a 'discount', the same trick salespeople have used forever.

I've had people applying to college happily tell me, 'the school offered me $30K in financial aid'. I try to (gently) tell them that it doesn't matter how much 'discount' the school offers, it matters how much they charge you. They can arbitrarily set their 'MSRP' at $100K and give you $80K in 'aid', or set it at $20K and give you no 'aid'; the result is the same.

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

#90

Post by smeyer »

hackuser wrote: post #89
smeyer wrote: post #83

Earlier quoted context omitted.

Harvard tries to recruit these students, but obviously isn't doing a good enough job of it. As a Harvard alum, this is somewhere that I'd particularly like to see them improve in terms of undergraduate education. When a majority of students are on financial aid, I don't think it's fair to say that "few will take it". Also, Harvard's graduation rates are so high that even if failing and dropping out are much more comm…

> When a majority of students are on financial aid ... A bit of a tangent: It also depends on how financial aid is defined. Many schools set an arbitrary price that very few students actually pay, the equivalent of a 'manufacturers suggested retail price'. In one NY Times story on this topic, at the school they looked into around 1% (IIRC) paid the MSRP; everyone else got a 'discount', the same trick salespeople have…

Absolutely! But many of Harvard's peer institutions have sticker prices just as high without the same level of financial aid. I'd say a fairer metric to use for comparison is what fraction of people have sufficiently large financial aid packages that they pay less than $X where X is some reasonable value (maybe the median cost of in-state tuition at flagship state schools?).

Another thing to watch out for is schools that say "the MSRP is $50k but we gave you $30k in aid so it's really $20k" when that $30k is loans, not grants. Harvard doesn't use loans (and very few students take them out), but as you go down a few tiers in financial aid that changes rapidly.

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