I think this discussion is missing one issue. At what point is a non-profit too big and taking advantage of the tax laws to the detriment of its neighbors who have to pay taxes to pay for items such as roads and public transportation.
For example, Harvard does have tours of its campus for tourist. This to me isn’t part of the education experience and the money generated from this type of activity should be taxed at the normal rate of any other business.
Net prices for family of 3, 1 in college, US citizen, MA resident, with incomes of:
0 to 65000 => 4600 (lowest net price)
70000 => 6000
80000 => 7000
90000 => 8200
100000 => 9600
Does not look too bad for the lower income to upper middle income ranges. Note that $4,600 of the net price is assumed to be a student contribution from work earnings, so (for example), the family with $100,000 income needs to come up with $5,000 in addition to the student’s work contribution of $4,600. That $5,000 would be at least partially offset by the savings from the student not consuming food and utilities at home.
At higher income levels, where some people on these forums describe themselves as “middle class”:
120000 => 13000
140000 => 17200
160000 => 24600
180000 => 34300
200000 => 45000
220000 => 52340
240000 => 61480
250000 => 66350 (highest income that still gets some financial aid)
260000 and higher => 69600 (list price)
Looks like it is the very upper end of “upper middle class” that complains the most about Harvard’s financial aid policies. That is even though the family with $260,000 income has after tax income of $182,427 after paying $77,573 in federal and MA state income tax and payroll taxes (see http://www.tax-rates.org/income-tax-calculator/ ), so it would still have $112,827 to live on after paying taxes and tuition. However, one can see that if they had an expensive lifestyle that spent all of their money instead of saving it for the kid’s college, parents’ retirement, etc., downshifting spending from $182,427 to $112,827 (even with one less person now in college) could feel painful to them.
Harvard DOES pay taxes on non-mission relevant activities (like any other nonprofit). You buy a calendar at the Metropolitan museum- you pay sales tax. You buy a glass of wine in the cafe at an aquarium or during intermission during the opera- the cafe has paid excise taxes and any other relevant taxes on that bottle of wine (just like you do depending on the state you live in and its liquor taxes/policies). You stay in the university owned and operated hotel on Cornell’s campus- you pay the hotel tax levied by Ithaca AND the State of NY.
Tax exempt doesn’t mean that these entities (any non-profit, not just colleges) don’t pay taxes. And the fact that a private company operates tours of Harvard – how is that germane to taxing Harvard’s endowment? Private companies operate tours of the Grand Canyon, Statue of Liberty, Viet Nam Memorial. So what?
I don’t really have any objection to the current proposal to impose a modest tax on nonprofit endowments that exceed $XXX,XXX per student ($100,000 or $250,000, depending on what day of the week it is). That’s hardly a significant threat to the educational mission of wealthy universities. (It’s interesting, though, that if you go with the higher threshold, only about 35 institutions would be subject to the tax, and half of them are LACs whose endowments, in absolute terms, are not so big.)
What does constitute an existential threat to higher education as we know it is the proposal to make tuition waivers and other now-untaxed scholarships for graduate students fully taxable. Today, PhD students in most fields get paid taxable TA salaries and stipends, which result in relatively small income tax payments because the amounts are generally subsistence-level. But next year that grad student with $1,500/month take-home pay could owe taxes on $100,000 of deemed income. He or she would have an effective tax rate of almost 20%, or about 100% of post-employment-tax take-home pay. In order to provide the same subsistence-level cash to a student, universities would have to increase by more than 150% the cash currently provided to graduate students.
The institutions with mega-endowments can afford that (but forget about actually giving the students more generous support). I don’t know who else can.
@JHS, The problem is that when you crack the door the bulls march in. Remember the income tax started at 3% and affected a tiny percentage of the population.
A $200,000 per year income (probably at least $140,000 after federal income tax, state income tax in a high-tax state, and payroll tax) is two or three times the median even in expensive places in the US. While it certainly is not plutocrat-level income, surely such a household can make ends meet and still have plenty left over to save for their kids’ college costs and the parents’ retirement. Even if they pay the Harvard net price of $45,000 for a kid there, they will still have $95,000 of after tax money to live on.
$200K middle class? Psshhht. Another fallacy that makes this thread nonsense. Talking about the middle class than throwing out $200K family income…just no. Even so, if you look at the data that @ucbalumnus helpfully posted in #49, even those families will get some kind of break. I’m not crying tears for families at this income level not receiving greater help from elite schools (likely the only schools that will give them aid at all mind you).
Hucklebury-- you have lost your mind if you are asking the rest of the country to worry about the “plight” of the 200K family vis-a-vis college affordability.
Someone at that income level has choices- and if they have chosen to live in New Canaan, CT instead of Bridgeport, CT it is really tough to feel sorry for them. Sure, they likely can’t afford a country club, a landscaper, etc. if saving for college is a priority. And no- they are not eating at Per Se. But they are hardly disadvantaged- or poor- or even strapped, unless the choices they make in terms of size of mortgage, size of car, or how often to go on vacation- has made them feel strapped and poor.
You were making an interesting argument a while ago- but if your point is to get the rest of society to 'bail out" the poor shmoe making do on 200K- sorry, not buying it.
I’m not going to google all of them - but Wall Street and most other NYC corporations - donate to both sides of the aisle: https://www.opensecrets.org/orgs/summary.php?id=d000000085 They give money to whoever is in power at the moment.
I’m not feeling sorry for the $200,000 earners in the NYC area either - there are lots of places where you can live affordably - maybe not in Manhattan, maybe not in Scarsdale, but you can and you can even have a reasonable commute. We earn way, way less than that. And we even eat at Per Se like places occasionally.
Imurhuklebury: Are you advocating getting rid of income based sliding scale college tuitions? In that case, I guess tuition has to be the price a family at poverty level can afford. How far above 0 is that?
Or am I misunderstanding and you are not necessarily opposed to a sliding scale?
I agree with you tuition is too high, even for those with a family income of $200,00 annually, and would really like to know what you think would be reasonable.
@Imurhucklebury As of 2015, a household with $130,000 of income is solidly within the top quintile of household incomes, and a household with $200,000 of income is just below the top 5% of all household incomes. Having sometimes earned not much more than that when my kids were in college, I completely appreciate how difficult that can make things, but in relative terms those are still affluent households. And while households with that kind of income in, say, suburban northern New Jersey or Silicon Valley will struggle to maintain something like a middle-class lifestyle, there are lots of other communities in which people with those incomes are affluent in fact, not just in theory. It’s also the case that many families with that sort of income have the capacity to save over time (or to borrow and to repay over time) to finance their children’s college educations without undue hardship. Some (not all, of course) can also call on other resources to fund college expenses.
For families with incomes below $175,000, Harvard charges substantially less than my state flagship charges in-state students. I can’t imagine why it would be a good use of Harvard’s endowment to reduce or eliminate tuition for students whose families earn $600,000, $1 million, or more annually.
So, sure, there’s an issue with Harvard’s affordability for some subset of what one would have to call “upper middle class” families. But in reality it’s a small subset that is hard to identify simply, and that represents a fraction of a couple percentage points of U.S. households. That’s hardly a basis for a wholesale attack on university endowments.
In addition to which: Newsflash! Universities do a lot more than undergraduate education. They (and their endowments) don’t exist for the sole or predominant purpose of providing bachelor’s-level education to 18-21 year-olds.
I always thought one of the many reasons for the CSS profile was to help out the high income families in extremely high cost of living parts of the country.
Wouldn’t the purpose of CSS Profile be more to try to make it more difficult for families to “hide” financial resources other than ordinary wage/salary income, and (if the CSS Noncustodial Profile is used) to exclude many students with uncooperative divorced parents from financial aid?
I honestly don’t know. They ask for home equity and mortgage. That can vary dramatically for families with similar incomes depending on locale. There is also a place to write in special circumstances: medical expenses, elder expense, etc.
eta: they ask for private school tuition for younger children.
Not.much help. You can run the ifap and try different high or low COL areas. But living large is discretionary. Colleges don’t need to support that.
We’ve had the threads where folks claim poor on 200-250k. How the mortgage is higher, heating and cooling that home, the nanny, vacations, sports enrichment, business lunches (can’t be seen brown bagging it,) ad infinitum.
Does that mean you think the catholic church should pay taxes? Does that mean that the political parties should pay taxes? How about a group like Americans for Prosperity. Should they pay taxes?