Conservative Confusion on Taxing Universities and Encouraging Charities
The budget bill that Republicans just passed in the House is simply terrible, and I will join in the chorus of criticism soon enough with a full column (or more) denouncing its overall awfulness. But in this relatively short column today, I will instead note two longstanding items on the Republicans' wish list that made their way into the current version of the bill and which will almost certainly survive to become part of whatever monstrosity is ultimately signed into law. I chose these two because they each highlight a somewhat unusual kind of confusion in the groupthink of movement conservatives.
The first item is the attack on universities, specifically wealthy elite universities. In my column earlier this week, "In Lieu of a 'Last Lecture,' I Offer These Thoughts," as well as in what must surely be dozens of columns that I have published over the years, I have argued that universities are uniquely important institutions that should be celebrated and supported, not attacked. But because universities are sources of independent authority and power, the American conservatives of the increasingly (and now openly) authoritarian bent who have emerged over the last half century or more have long hated the academy. They claim without evidence that universities are "indoctrination" centers, they disparage professors with the "Those who can't do, teach" line, and on and on.
In their current budget bill, Republicans have increased a tax on universities' endowments that they first passed in their terrible 2017 exercise in tax regressivity. The new plan is predictable in being poorly drafted and aimed at so-called wokeness, but whatever. My small point here is that the tax that Republicans are imposing on universities is of a sort that they have very recently opposed. The tax is styled as an "endowment tax," and guess what? Endowments are wealth, and Republicans claim to hate wealth taxes.
To be clear, however, the tax is formally an excise tax and is imposed on "net investment income," which is not wealth. Or is it? Notably, the tax only "applies to universities with at least 500 tuition-paying students and at least $500,000 endowment assets per student," so even if the tax computation does not directly use a university's endowment as the relevant base, the tax is being imposed on the basis of differences in universities' wealth. Moreover, imposing the tax on "net investment income" means that the tax is levied on the returns to wealth.
Does that matter? Not to me. I have written many times over the years (for example, here and here) that wealth taxes are constitutional, and certainly that taxes on the income derived from wealth are constitutional. But conservatives disagree, and although the Supreme Court's Moore decision last year dodged the bigger issue, conservatives were all over the idea that taxes on at least some wealth-derived income are a constitutional abomination.
Of course, conservatives have other plans for attacking universities, including "proposals advanced last month by the House Committee on Education and Workforce, including caps on federal student loans, a reduction in Pell Grant eligibility and a plan to make colleges responsible for paying a portion of their students’ unpaid student loans." And although I can hardly express surprise that Republicans would be inconsistent about using taxes in particular to attack wealthy entities who are not in Trump's pocket, it does seem notable that all of their efforts to misread the 16th Amendment and say that "taxes on income derived from wealth are taxes on wealth" would apply in spades here. Funny.
The second smaller point that occurred to me about the Republican's budget bill is not specific to that particular piece of legislation but is more generally about the "Let private charities, not the government, take care of the poor" argument that they are now using to justify throwing millions of people off Medicaid and to excuse themselves for starving children.
As it happens, my old "boss," Florida Governor Meatball Ron DeSantis, currently finds himself in a bit of hot water because of possible criminal diversion of money from a Medicaid settlement to a private charity that his wife (who apparently is now trying to position herself to run for governor next year) runs in that state. That is all very juicy, but my point here is much more basic. The charity in question apparently is set up as something like a call center that pushes people in need toward private charities, supposedly to save the state money on "welfare."
Why is that notable? After all, this is one of conservatives' most common go-to arguments when it comes to accusations of being heartless: "We care about people, but it is not the government that should be taking care of them." The problem is that they base their claims that governments should not be in the charity business on two ideas that do not add up (independently or in tandem).
First, as former House Speaker Paul Ryan infamously put it, government "handouts" turn a safety net into a "hammock." In other words, Ryan claimed to believe in the long-discredited notion called dependency theory, which conservatives have been using for decades to say that government social spending harms the economy by making people work less and harms people themselves by undermining their work ethic. But if one believes any of that, then the government should not be trying to push needy people toward charities. The source of the work disincentive should not matter, and a true conservative would want to make it illegal for charities to harm our citizens' productivity.
This is a variation on the observation that conservatives who believe that abortion is murder have no principled grounds on which to moderate their views. If it is indeed the murder of a human being, then the people involved should be prosecuted. More recently, there was the controversy arising out of Alabama's Supreme Court decision that consistently and logically extended their Christian logic to say that IVF is murder. That their own legislature quickly passed a law to make IVF legal in the state was craven politics, but that does not mean that the court's decision was not the "right" outcome based on the moral starting point that these people claim to share.
So again, because Republicans are all excited about dependency theory -- and their method of cutting people from Medicaid and Snap/food stamps was to add work requirements -- then they should be shutting down or at least strongly discouraging churches and anyone else who would undermine the Republican party's brave efforts to get people off their butts and back to work. Maybe they should impose an endowment tax on churches that dare to help the poor, or take away their tax-exempt status?
And speaking of tax-exempt giving brings us to the second of the Republicans "Let the charities do it" arguments, which also collapses on itself. Sometimes, conservatives fetishize the public/private distinction and say that "the taxpayer" should not be forced to spend money on lazy people. But of course, the Supreme Court has long recognized that the charitable deduction is a de facto expenditure of taxpayer funds. For example, in 1983's famous Bob Jones University case, the Court approvingly quoted an earlier Congressional report to this effect:
The exemption from taxation of money or property devoted to charitable and other purposes is based upon the theory that the Government is compensated for the loss of revenue by its relief from financial burdens which would otherwise have to be met by appropriations from other public funds, and by the benefits resulting from the promotion of the general welfare.
So yet again, we see that there is no there there. "We're not having the taxpayers pay for this with direct funding, we're only have the taxpayers pay for this with indirect reductions in revenue" is sophistry.
None of this will stop Republicans, of course. Even so, it is useful sometimes to step back and look at all of the ways in which they will merely say whatever happens to suit their purpose in a given moment and then abandon a supposedly deeply held principle (see also federalism) as soon as it is convenient.
- Neil H. Buchanan