Tax Cuts Deliver Higher College Tuition, Fail to Grow the Overall Economy

I suppose you have noticed that substantive discussion of our nation’s problems has fallen by the way in this year’s election season. At best candidates are selling reform proposals without explaining exactly how such plans could be realized and precisely how they would address very real problems. Everybody seems to believe in free tuition at public colleges and universities, for example, but there are few clear answers about why college costs have skyrocketed in recent years and where the money to underwrite free tuition would come from.

Despite that historically our society has affirmed the role of public institutions paid for by taxes for ensuring essential services and protecting the good of the wider community, and despite that we have traditionally believed that the tax code should be progressive with the heaviest burden on those with the greatest financial means, an anti-tax climate now dominates our politics. Funding for essential state services—social services for the poor, public K-12 education, and in recent years state colleges and universities—has fallen by the way.  Doug Webber, an economist at Temple University, one of Pennsylvania’s public universities, explains: “It’s tempting to blame Temple’s shiny buildings and new administrators for the big increase in tuition. But there’s another, much more important reason for the rising costs.” Since 2000, “Pennsylvania’s state government (has) cut its per-student appropriations by $6,000 in inflation-adjusted dollars. The rapid increase in the cost of college in recent decades—and the associated explosion in student debt, which now totals nearly $1.3 trillion nationally—is all too familiar to many Americans. But few understand what has caused the tuition boom, particularly at the public institutions that enroll roughly two-thirds of all students at four-year colleges. Many commenters, particularly in the popular press, focus on ballooning administrative budgets and extravagant student amenities…. but by far the biggest driver of rising tuitions for public colleges has been declining state funding for higher education.”

Webber examines the facts: “At most, about a quarter of the increase in college tuition since 2000 can be attributed to rising faculty salaries, improved amenities and administrative bloat.  By comparison, the decline in state support accounts for about three-quarters of the rising cost of college… (I)f Pennsylvania restored funding for higher education to its 2000 levels, Pennsylvania’s public research institutions could reduce tuition by nearly $4,000 per year without altering their budgets.  For students, the impact could be even greater once loan fees and interest were taken into account… If funding had held steady, universities could have built new buildings, hired more administrators and tended to other priorities while still keeping tuition hikes in check. With huge budget cuts, big tuition increases were inevitable.”

Data updated in mid-August from the Center on Budget and Policy Priorities (CBPP), confirms that Webber’s analysis of public funding for state colleges and universities explains a national trend, not merely the sad reality in Pennsylvania, where the legislature has been rigidly committed to avoiding tax increases. “Of the states that have finalized their higher education budgets for the current school year, after adjusting for inflation, forty-six states—all except Montana, North Dakota, Wisconsin, and Wyoming—are spending less per student in the 2015-16 school year than they did before the recession… The average state is spending $1,598, or 18 percent, less per student than before the recession.”  While 38 states did increase per-student, higher education funding in the past year, the increases were too small to reverse the trend of diminishing state investment in institutions of higher learning.

Nine states have reduced per-student funding for their public colleges and universities by more than 30 percent since the 2008 recession began: Alabama, Arizona, Idaho, Illinois, Kentucky, Louisiana, New Hampshire, Pennsylvania, and South Carolina.

In the past year alone, Illinois cut per-student, higher education funding by $1,746, and five other states cut funding for their public colleges and universities by more than $250 per student: Alaska, Arizona, Oklahoma, West Virginia, and Wisconsin.

Unlike the federal government, states are required by law to balance their budgets every year.  When states cut income taxes or make them regressive and when they cut corporate taxes, there are less dollars for essential services like public K-12 education, and public colleges and universities. It is a matter of simple arithmetic. What is often overlooked is that along with the rising expenses for students when college tuition grows, state economies suffer as middle class workers like school teachers and counselors are laid off and as low-paid adjuncts replace tenure-track college professors.

Here is John Hanna’s most recent update for the Associated Press on the ongoing pain caused by Kansas Governor Sam Brownback’s experiment with tax cutting: “Kansas saw its tax collections fall $10 million short of expectations in August, and Republican Gov. Sam Brownback is blaming a soft economy even as his critics make his tax-cutting policies a key issue in the year’s elections. The state Department of Revenue’s report (at the end of August 2016)… marked the fourth consecutive month that Kansas has failed to hit its revenue projections, and tax collections have fallen short 10 of the past 12 months… Kansas repeatedly has missed monthly revenue targets and struggled to balance its budget since GOP legislators heeded Brownback’s call to slash personal income taxes in 2012 and 2013 as an economic stimulus.”

Politicians like to promise that tax cuts for the wealthy and for corporations will grow the economy—that prosperity will trickle down to the rest of us.  Paul Krugman, the Nobel Prize-winning economist, rejects such supply-side economics: “True, you can find self-proclaimed economic experts claiming to find overall evidence that low tax rates spur economic growth, but such experts invariably turn out to be on the payroll of right-wing pressure groups (and have an interesting habit of getting their numbers wrong). Independent studies of the correlation between tax rates and economic growth, for example by the Congressional Research Service, consistently find no relationship at all. There is no serious economic case for the tax-cut obsession.”

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One thought on “Tax Cuts Deliver Higher College Tuition, Fail to Grow the Overall Economy

  1. ” Everybody seems to believe in free tuition at public colleges and universities”
    I do not. If everyone or most in a state attended these colleges, or if it were in the best interest of the state that they do, then perhaps it MIGHT make sense. But to force those who will never attend these colleges to pay for the specialized education of others is immoral. And how much value will the beneficiaries place on their “free” education? How concerned would they be that the significant expense granted them would then provide a real return in employment opportunity and wage growth and fill a market or societal need…that the investment was worth it?? You only need a cursory examination of human nature (or just human experience) to realize that those who invest their OWN money are most concerned that they get something of VALUE out of it.

    This is only one point of many I have with the commentary above. But in short, I have major problems with the assumption that the taking of one’s labor by force so that unaccountable planners can spend that capital where they wish (often to their own personal benefit), is far better, more efficient, or more noble than individuals with a personal relationship to their community deciding how best to invest in their community’s improvement.
    Even the wealth of the uber-rich that may be sitting in huge bank accounts is without question being far better allocated to the community’s betterment (invested in myriad ventures with risk/return concerns and at personal risk to those assessing the investments) than is possible by public bureaucrats who have limited understanding, and often very little experience, in the programs they conceive and even less personal investment in their outcomes.

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