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Taxing a la Carte
November 3, 2010 - 11:39pm

This story about the election results got me wondering. (And everybody can put the knives down -- I’m not analyzing candidates here.)

In a climate in which government spending is generally considered suspect, and in which people who campaign on “tax cuts good, spending bad” do very well, ballot measures that supported higher education specifically did very well.

When taxes are considered as part of a lump sum, they’re despised. But when they’re earmarked for specific purposes, they seem to be more popular. Which makes sense psychologically, since the earmark makes it easier to see the point.

Would public higher ed be better off moving from being the “balance wheel” of state budgets (hat-tip to Jane Wellman of the Delta Cost Project for the phrase) to having its own dedicated tax?

I’m wondering if a dedicated tax would be harder to cut than an appropriation in an omnibus bill. Somebody may have done some empirical research on this, but I haven’t found it.

Social Security might be a decent example. Politicians routinely run on cutting income taxes, and some of them will enact substantial cuts on social programs, given the chance. But I literally can’t remember the last time someone ran on reducing the FICA tax. (Bush II floated a variation on that in 2005; it went over like a lead balloon.) As annoying as the FICA tax is, people sort of accept it, because they understand what it’s for. An “income tax” is an undifferentiated mass, but a Social Security tax is for one specific thing.

Higher education gets nailed badly during recessions, because state income tax revenues go down and unemployment claims go up, and the difference has to be made up somewhere. Since K-12 and prisons don’t really have alternate revenue sources -- okay, some prisons do, but that’s another post -- it’s easy for legislators to look at higher ed’s tuition stream and decide that cutting college aid would do less harm than cutting other things.

But what if that option were off the table? What if, instead, higher ed had its own a la carte tax? Call it the “college and university” tax, or something catchier, but make it clear (and enforce legally) that it can only go for the public colleges and universities in a given state.

Yes, the money would fluctuate with the economy, but it would probably fluctuate less than appropriations from general budgets do now. With relative predictability, colleges could actually make (and stick to) spending plans without constantly interrupting them to make up for midyear cuts.

Admittedly, the devil can hide in the details. Property taxes are probably easier to administer than income taxes, but they’re also probably harder to sustain politically. They would also establish an expectation of being used locally, whereas income taxes are more often used at the state level. But these strike me as surmountable.

I know that different states operate differently, so some wise and worldly readers may have seen something like this done somewhere. Those who have, how well did it work? International readers -- the worldliest of the worldly -- is something like this done where you are? Does it seem to be a safer haven for higher ed, or is it just as vulnerable? Is there a catch I haven’t seen?

 

 

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