With all the talk about the 1% and the need to redistribute this wealth let me put this out for discussion. How about a law the makes donations to colleges and universities with say $5 billion dollars or more of endowment not being tax deductible. Also, the income from those large endowments would be taxed. The revenue could be used to expand Pell grants!
Or the cutoff could be in terms of endowment per student.
Why only “redistribute” their money? Why not yours, too? Why not outright confiscation and seizure (“redistribution” is just the PC word for it)?. In fact, anyone with a spare bedroom in their home should be mandated to give it to a poor person. Anyone with two cars should be mandated to give one to a poor person. There should be more free stuff for poor people (free healthcare, free schools, housing subsidies, food stamps, free job training, free social services, no taxation, etc don’t count).
They already redistribute my money, and yours too. it is called income tax.
^^ Especially. So why invent some new subtle tax on giving to schools, whatever the size of their endowment?
The fact of the history that most keep forgetting is that the more you redistribute, the lower level of living for the whole society. I know, it is hard to face the ugly truth, but the end of this process is a misery for every single one with exception of those who are in power - a.k.a - government. I strongly suggest to study history much closer and with much more analysis than just seeing a string of dates and names. All these current speeches about redistribution are …not that recent, if you take a closer look at the history. They are 100 years old. They were spoken in different language, but it makes no difference in regard to their meaning and where such policies lead. Of course, back then, they used arms and they used to kill the most productive members of the society. Now they have an IRS at their disposal, they do not need to kill, they can just kill financially, destroy what took generations to build. And it does not matter where it is all happening, the results are ALWAYS the same, because History is a science, it has its laws, it is NOT a collection of dates and names as many here prefer to think about it. Ignoring the lessons of History has always produced devastating results.
This thread is going off track. My point is why is it a tax deduction when someone donates 300,000,000 to a $42 billion “charity” like Harvard?
Because most people who make donations don’t want a law saying they can donate to X and not Y based on the wealth of the organization. The Salvation Army has lots of money, does it really need more? What about that megachurch down the street with the fancy free lattes? Or the Catholic Church? It’s sitting on all those relics and cathedrals and real estate…
OK, so let’s suppose for a moment that the government creates this tax. What do you think is going to happen to that $300 million donation? Do you think that someone will still donate to Harvard? No - they donate for the tax deduction. Then what do you think is going to happen to Harvard’s endowment? It shrinks. Then what do you think will happen to the people who are receiving endowment money to pay for their Harvard educations? They won’t be getting money. Then what do you think will happen to the student body at Harvard? Only the wealthy 1% will be able to afford it.
Like it or not, capitalism works - at least for those people who have a dream and who are willing to do what it takes to make that dream a reality.
“The fact of the history that most keep forgetting is that the more you redistribute, the lower level of living for the whole society.”
Sorry, @MiamiDAP you’re way off here. Ever hear of the GI Bill? Redistribution of tax money to a select group of people that catapulted an entire generation into unheard-of-before security? The New Deal? Which pumped federal funds to all kinds of people and undertakings, saving millions from hunger and penury?
A $42 billion endowment will produce about $2 billion in income per year. Only a small portion of that goes to student aid. Maybe the donations will go to less well endowed schools.
the Salvation Army does not have a huge “reserve”.
Many of those 1% haters will fight to see their beloved uber endowed alma maters “protected” from any attempt at redistribution of that endowment wealth: hypocrites!
The GI Bill and The New Deal aren’t the same thing as just redistributing income. In the case of the GI Bill, those men earn a certain amount of money for each year of service that can be used for college. The sergeant with 20 years will have a larger GI Bill than a private with two. And, most New Deal projects involved people actually working to earn a paycheck. Yes, they were working for the government, but they earned their incomes building dams, bridges, schools, and other infrastructure projects. Different attitudes than some of today’s students who want a free ride to college, but don’t want to give of themselves in return.
Your plan penalizes successful endowment managers to benefit the incompetent ones.
Colleges with a track record of taking their donations and making them grow should be subject to the tax- but colleges which get donations and either spend them too quickly or invest them terribly don’t get taxed?
Any plan which provides incentives for the incompetent to continue being incompetent is a bad plan in my book. If people object to Harvard’s success running an endowment they will vote with their feet and checkbooks by discontinuing their donations.
People don’t donate art to the Metropolitan Museum or the Houston Museum of Fine Arts because either museum needs more “stuff”. They do it because both institutions have proven that they know how to preserve, display, protect cultural artifacts and works of art for the benefit of the public. So people donate more. There are dozens of museums whose collections are in danger from water, rodents, poor climate control, fiscal irresponsibility, bad capital planning, etc. Do you think people should be encouraged to give works of art to museums which can’t seem to figure out how to execute against their mission?
I’m not arguing it is “just” redistributing income. But it IS redistributing the vast financial resources that a government possess to at least seed – if not outright sustain – major undertakings.
To dismiss redistribution of any kind as driving down people’s standard of living, as MiamiDAP did, is simplistic and absurd.
We should get rid of the charitable deduction and all other deductions. I am tired of the arguments which state that tax benefits should go to these wealthy profitable non-profits.
So…if society can’t get rid of these tax benefits…
We can get rid of all the deductions and change the income tax rates to match something similar to what people actually pay instead of using existing tax rates.
We can tax all income equally…earned and unearned…
Everybody would receive a large standard deduction.
Then we would have many tax rates. The number of tax rates does not determine the complexity of paying taxes.
We could have a 5 percent tax rate, a 10 percent tax rate, a 15 percent tax rate, and continue this to about a 40 percent tax rate.
We can even have a negative income tax rate to take the place of the earned income tax credit.
Well frankly I’d prefer my tax money not go to the Catholic Church. It’s sitting on trillions of dollars in assets. It paid hundreds of millions to survivors of rape without breaking a sweat.
Starting down this path of which nonprofits deserve tax support based on their wealth is slippery.
If you wanted to just raise revenue for the federal government to operate, a flat tax would be the most efficient approach. However, the tax code is used for more than just that. Its used to influence behavior. And to reward political supporters and penalize political opponents.
But once you allow deductions for behaviors you presumably want to encourage, I think its tough to single out given instances of that behavior that you don’t feel should get the benefit (for whatever reason) or because you believe some entity to be too wealthy.
What @dstark said!
How is it a greater good for me to have a mortgage than to pay tuition? Why is one a deduction but not the other?
If you want to give to a church (which, btw, doesn’t pay property tax) or a college, knock yourself out. Don’t force me to subsidize it by reducing your taxes as a result. How reprehensible that I am forced, via the tax code, to subsidize another taxpayer’s donation to an anti-LGBT church or schools in North Carolina that discriminate against my family. I understand that I don’t get a line-item veto on government’s spending of my tax dollars, but a “charitable” donation to a reprehensible charity is a forced subsidy that doesn’t deserve to endure.
Because when you donate to the college (or hospital, or church) of your choice, you already are relinquishing some of your income for the public good. The government properly leaves that choice entirely to you. It doesn’t expect you to contribute a second time with a tax on income you’re already giving away.
I think such a plan would discourage people to donate to higher education. While one can argue that many schools don’t need greater endowments, I would argue that the endowments go towards important causes: research on important projects, financial aid and scholarships, hiring qualified professors and staff (many are also currently underpaid at certain universities), and supporting organizations such as student life and the counseling center.
Given that many institutions do already use some of this money towards financial aid and scholarships, I think it would be ineffective to tax these organizations and discourage people from donating to higher education, which is the reason why we have so many advancements we see in society today. I am not saying that some colleges don’t necessarily always put this money to the best use, but I think taxing and redistributing some of this wealth would be counterproductive towards your goals and would not be the best way to achieve it
It is also more politically effective to subsidize something that a politician favors via tax deduction or credit than adding government spending to subsidize it, even though the fiscal effect on the budget is the same. When someone notices the “wasteful special interest” perk and tries to remove it, it is harder to remove a tax deduction or credit (“raising taxes”) than government spending (“cutting wasteful government spending”).