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What would "meat" look like to you? Suppose you were to start "a hedge fund with a university attached to it", in order to use the university's non-profit stat

by dalke 11y ago

What would "meat" look like to you? Suppose you were to start "a hedge fund with a university attached to it", in order to use the university's non-profit status to minimize paying taxes. What would that look like? Would you set up need blind admission, in order to provide better cover to justify the hedge fund? The article points out that the non-profit status means that "Princeton received $105,000 in tax benefits per student. Rutgers, New Jersey’s flagship public university, got just $12,300 per student in public funding." and "Among the 60 schools Schneider and Klor de Alva analyzed, private universities with large endowments averaged $41,000 in tax subsidies, compared with $15,300 in direct funding for public flagships, $6,700 for regional state colleges, and $5,100 for community colleges." Perhaps the extra $90K/year effective subsidy per Princeton student explains why Princeton was one of the cheapest options?

nemothekid 11y ago
I'm not sure what your point is. Let's say the above were true, a non profit organization uses its tax subsidies to let students attend for free - how is that not a good thing? And how is that not something that should be encouraged?
- vilhelm_s 11y ago
  We should compare to how much good the same money would do if it was taxed instead of left to Harvard? E.g. the German state pays $32,000 per student and degree, so foresaking $400,000 of taxes in order to educate one student seems like a bad deal.
- dalke 11y ago
  My point was that the article provided some substance, and gave numbers which explain why a needs blind admission policy does not, on its own, justify the existing tax policy. The question you asked was addressed in the article, in statements like "In a world where the government only provides limited resources for higher education, we’re almost certainly shoveling an outsized share of them to schools that don’t need the financial help." and "we seem to have stumbled into a system that disproportionately subsidizes the educations of a tiny few." The second page tries to address what a more equitable distribution might be. For example, "Republican Sen. Chuck Grassley caused a minor uproar in higher education circles by proposing that colleges should be forced to spend 5 percent of their endowments every year, the same way private charitable foundations are." However, the author is clear that there is no simple answer, and leaves the topic hanging with "I think we’d all like to spend a little less money sending other people’s kids to Harvard." Personally, I think it should have ended with "we'd all like to spend a little less money sending people to Harvard and more money sending more people to college." As to your last question, there is a balance of factors that make it difficult to answer. If the monetary policy is such that one person gets to attend Harvard for free or 4 people get to go to a public college for free ... which should we choose, and why? (Based on the numbers in the article, and the cost of tuition for different colleges, the actual number is probably between 1:2 and 1:6.)
euroclydon 11y ago
> Suppose you were to start "a hedge fund with a university attached to it", in order to use the university's non-profit status to minimize paying taxes. Who is "you"? Certainly not someone who expected to ever extract cash from their hedge fund in order to make it part of their income for that year. Now you might say the school is a lavish club for students and faculty, but who benefits from that? Not the donors. If they're wealthy, they've got far more efficient spending options to enjoy marble floors and leather sofas.
JoshTriplett 11y ago
> Suppose you were to start "a hedge fund with a university attached to it", in order to use the university's non-profit status to minimize paying taxes. What would that look like? As long as all the funds went towards the chartered goals of the non-profit, it would look like a really good idea for sustainable funding. I don't see any reasonable basis on which the article's comparison makes sense. They compared the tax not paid by a registered non-profit with tax funds taken from taxpayers and spent on public universities, such that if someone doesn't pay . Apples and oranges. 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. Apart from that, based on past evidence, collecting such taxes would not replace taxes collected from others to support a tax decrease; rather, it would just increase the total size of the budget. 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.
- dalke 11y ago
  "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 don't see a difference. It's the same as having a deduction on my taxes vs. paying less taxes, no? The end result on what I pay is the same. Which is why I think that tax free status on "investments that range from stocks and bonds to California wine vineyards" does count as being similar to a subsidy on the for-profit equivalent. 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? I don't dismiss your point regarding past evidence. However, I think that's symptomatic of a different structural failure, where the cult of hiring MBAs running something "like a business" has taken over schools, health care, government and other organizations which should not have the high rate of failures seen in businesses. (Eg, Cooper Union.) That topic is quite outside of this discussion, and I'm willing to accept your conclusion. Regarding "looking at the contents of someone else's bank account and wishing it was yours" - that's a wealth tax, and it exists in France, Norway, Spain, and several other countries, so it does make sense to some.
superuser2 11y ago
Am I using the hedge fund profits to buy a yacht, or run a university? If the latter, then good!
- stillsut 11y ago
  Since I don't own a boat, I wouldn't mind if they bought a bunch of yachts. Since I live in Cambridge, I care very much how much gets fenced into official Harvard only property.

by dalke 11y ago

nemothekid 11y ago

I'm not sure what your point is. Let's say the above were true, a non profit organization uses its tax subsidies to let students attend for free - how is that not a good thing? And how is that not something that should be encouraged?

vilhelm_s 11y ago
We should compare to how much good the same money would do if it was taxed instead of left to Harvard? E.g. the German state pays $32,000 per student and degree, so foresaking $400,000 of taxes in order to educate one student seems like a bad deal.
dalke 11y ago
My point was that the article provided some substance, and gave numbers which explain why a needs blind admission policy does not, on its own, justify the existing tax policy. The question you asked was addressed in the article, in statements like "In a world where the government only provides limited resources for higher education, we’re almost certainly shoveling an outsized share of them to schools that don’t need the financial help." and "we seem to have stumbled into a system that disproportionately subsidizes the educations of a tiny few." The second page tries to address what a more equitable distribution might be. For example, "Republican Sen. Chuck Grassley caused a minor uproar in higher education circles by proposing that colleges should be forced to spend 5 percent of their endowments every year, the same way private charitable foundations are." However, the author is clear that there is no simple answer, and leaves the topic hanging with "I think we’d all like to spend a little less money sending other people’s kids to Harvard." Personally, I think it should have ended with "we'd all like to spend a little less money sending people to Harvard and more money sending more people to college." As to your last question, there is a balance of factors that make it difficult to answer. If the monetary policy is such that one person gets to attend Harvard for free or 4 people get to go to a public college for free ... which should we choose, and why? (Based on the numbers in the article, and the cost of tuition for different colleges, the actual number is probably between 1:2 and 1:6.)

euroclydon 11y ago

> Suppose you were to start "a hedge fund with a university attached to it", in order to use the university's non-profit status to minimize paying taxes. Who is "you"? Certainly not someone who expected to ever extract cash from their hedge fund in order to make it part of their income for that year. Now you might say the school is a lavish club for students and faculty, but who benefits from that? Not the donors. If they're wealthy, they've got far more efficient spending options to enjoy marble floors and leather sofas.

JoshTriplett 11y ago

> Suppose you were to start "a hedge fund with a university attached to it", in order to use the university's non-profit status to minimize paying taxes. What would that look like? As long as all the funds went towards the chartered goals of the non-profit, it would look like a really good idea for sustainable funding. I don't see any reasonable basis on which the article's comparison makes sense. They compared the tax not paid by a registered non-profit with tax funds taken from taxpayers and spent on public universities, such that if someone doesn't pay . Apples and oranges. 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. Apart from that, based on past evidence, collecting such taxes would not replace taxes collected from others to support a tax decrease; rather, it would just increase the total size of the budget. 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.

dalke 11y ago
"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 don't see a difference. It's the same as having a deduction on my taxes vs. paying less taxes, no? The end result on what I pay is the same. Which is why I think that tax free status on "investments that range from stocks and bonds to California wine vineyards" does count as being similar to a subsidy on the for-profit equivalent. 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? I don't dismiss your point regarding past evidence. However, I think that's symptomatic of a different structural failure, where the cult of hiring MBAs running something "like a business" has taken over schools, health care, government and other organizations which should not have the high rate of failures seen in businesses. (Eg, Cooper Union.) That topic is quite outside of this discussion, and I'm willing to accept your conclusion. Regarding "looking at the contents of someone else's bank account and wishing it was yours" - that's a wealth tax, and it exists in France, Norway, Spain, and several other countries, so it does make sense to some.

superuser2 11y ago

Am I using the hedge fund profits to buy a yacht, or run a university? If the latter, then good!

stillsut 11y ago
Since I don't own a boat, I wouldn't mind if they bought a bunch of yachts. Since I live in Cambridge, I care very much how much gets fenced into official Harvard only property.