SENATE BILL: Independent Educational Institution Relief Act (Redraft Passed)

[Fmr. Pres. Duke]

I am going to assume that most schools have 5% or greater of its students receiving loans. I doubt any school pays that tax. In the event some did, why would we apply it to all universities? State supported ones are already using taxpayer dollars. It makes no sense to levy a 50% tax on their revenue.

All in all, the wording either needs to be cleaned up (exempt public, tax payer funded universities) or we need to just do away with it because no one pays it anyway.

[Fmr. Pres. Duke]

http://nces.ed.gov/fastfacts/display.asp?id=31

Yeah, no school pays that tax. Look at how many students receive aid of some sort. No college exists where <5% of its students are receiving aid.

[Fmr. Pres. Duke]

Yes, some colleges are paying this tax.  Federal aid is not available for students attending institutions run by for-profit companies.  Also there are some colleges such as Hillsdale that have a philosophical objection to accepting federal aid.  So I imagine there is some revenue from this tax, but not enough to justify this policy.

Oh god, I do hate for-profit schools though, especially ones run by consortiums that are essentially degree mills and students graduating from these schools have no job prospects and come out with loads of debt. There is a company that runs Charlotte Law School and they are backed by a hedge fund. They charge $40k a year and their students literally have no jobs when they come out.

[Fmr. Pres. Duke]

Yes, some colleges are paying this tax.  Federal aid is not available for students attending institutions run by for-profit companies.  Also there are some colleges such as Hillsdale that have a philosophical objection to accepting federal aid.  So I imagine there is some revenue from this tax, but not enough to justify this policy.

Oh god, I do hate for-profit schools though, especially ones run by consortiums that are essentially degree mills and students graduating from these schools have no job prospects and come out with loads of debt. There is a company that runs Charlotte Law School and they are backed by a hedge fund. They charge $40k a year and their students literally have no jobs when they come out.

Yeah, so I'm fine that we don't fund loans to those institutions, but we shouldn't then turn around and punish them for not having loans we don't offer them and make students lose even more money.

Typically, the consortium is the one that funds the loans. I am not sure not taxing them will cause them to lower their tuition, since they already charge the going rate of other private schools.

That said, I wouldn't be opposed to dropping the tax if the Senate votes to do so, especially if it is hurting students more so than the company vis a vis interest rates, but taxing the for-profit bastards isn't something I mind either. I think their product is a farce and they prey on people who don't know any better.

[Fmr. Pres. Duke]

I know this may not be popular for me to say, but the more I think about it, the more keeping this tax intact makes sense. I have a strong disdain for for-profit educational groups. They prey on kids without many future prospects, and kids that are scared. They tell them unrealistic things to get them in, charge them a hefty tuition and send them on their way no better than they were before.

If this tax is hurting the student, I would be willing to consider repealing the tax. Typically though, the loans funded by these private groups are on par with the public loans. If I'm wrong, please correct me. I'm all for helping the student, but if this will only help the folks making money off these poor kids, I'm for keeping it.

I hope my view at least makes sense to some people. I don't want to appear like I am a friend to the for-profit educational consortiums, because I'm not.

[Fmr. Pres. Duke]

I know this may not be popular for me to say, but the more I think about it, the more keeping this tax intact makes sense. I have a strong disdain for for-profit educational groups. They prey on kids without many future prospects, and kids that are scared. They tell them unrealistic things to get them in, charge them a hefty tuition and send them on their way no better than they were before.

If this tax is hurting the student, I would be willing to consider repealing the tax. Typically though, the loans funded by these private groups are on par with the public loans. If I'm wrong, please correct me. I'm all for helping the student, but if this will only help the folks making money off these poor kids, I'm for keeping it.

I hope my view at least makes sense to some people. I don't want to appear like I am a friend to the for-profit educational consortiums, because I'm not.

I don't understand. Are you saying that it doesn't matter how the tax increases the tuition cost for the student because there are private loans to cover it?

What I am saying is, I would be more likely to support it if we knew the tax directly caused the tuition to be as high as it is in these for-profit institutions. If it does not effect the student, we should keep it. I only have knowledge about legal education. There, the loan rates for these for-profit schools are just as competitive with the federal loan system and their tuition tends to be on par with other private schools.

My beef with these for-profit conglomerates is they prey on uninformed students and tell them lies to get them in the door, they give them a giant loan, and they send them on their way. I am generally lenient on taxes because many of them are inefficient, but in this case, I don't think we want to encourage for-profit education anymore than we do. It literally helps no one except those who are making a profit and puts thousands of students in debt each year.

[Fmr. Pres. Duke]

We can certainly give it a shot, but my understanding is, this tax exists to discourage for-profit education in general, which is something I am very supportive of. I will wait and see if anyone else chimes in on this before I come to a final decision, but ultimately I will do what is best for the student.

I would just hate for us to repeal this tax only to see for-profit educational centers become even more numerous.

[Fmr. Pres. Duke]

You seem to be comparing tuition cost at other private universities with tuition cost at for-profit universities before the tuition tax, so I don't think that tells us how the tuition tax is affecting cost.   I'd say let's just go with the common sense observation of what we see with almost all taxes, particularly sales or excise taxes, which is that they get passed on to the person buying the product.

It would be good to find a way we can help students from being burdened by loans they won't be able to pay back, but the current tax doesn't help with that at all.

The university market is not perfectly competitive nor remotely homogenous, so the assumption that the cost to bear on such a tax falls squarely on the consumer is not necessarily validated by macroeconomic theory. It could be true, but it's not fair to assume it.

Right, the university system tends to act more like an oligopoly. When tuition is hiked at one school, the others tend to follow suit (like when Boston U hit 60k a year, other school soon followed), but in the end, the prices tend to congregate around a median.

Because these for-profits are charging the same rates as other non-profit private universities which do not pay the tax, I think we can assume the tax is not effecting the students too badly, at least not any worse than attending the school in the first place is effecting them.

It would be a stretch to assume that repealing the tax would lead to a drop in tuition at all. More likely, we will see these conglomerates reap larger net profits after taxes.

Of course, I could be wrong. I may be letting my personal feelings toward this type of "education" get in the way and cloud my judgment.

[Fmr. Pres. Duke]

Because these for-profits are charging the same rates as other non-profit private universities which do not pay the tax, I think we can assume the tax is not effecting the students too badly, at least not any worse than attending the school in the first place is effecting them.

again, I do not know where you could be getting tuition rate information for colleges that pay a 50% tax on tuition, since since a scenario does not exist IRL.
I don't assume that a 50% tax translates into a 50% tuition increase.  I do think it is reasonable to assume that it most likely means some substantial increase.  

Oh, I see what you're saying. I guess the only way we figure it out is for the GM to make up some numbers for us.

But like I explained above, I doubt it will be a substantial difference, tax or no tax, because most educational institutions follow suit in price setting. It would be my hope that the tax is simply discouraging more for-profits from hitting the market, but we are all theory crafting here.

[Fmr. Pres. Duke]

At this rate, I am leaning on just keeping the tax the way it is. I certainly don't favor raising it, but I am not sure I want to drop it entirely given who it will benefit.

[Fmr. Pres. Duke]

Do for-profit institutions even have athletic programs? Regardless, I am still not fully sold on giving these degree mills any sort of tax relief whatsoever.

[Fmr. Pres. Duke]

Do for-profit institutions even have athletic programs? Regardless, I am still not fully sold on giving these degree mills any sort of tax relief whatsoever.

A few points:

We are talking in some cases about nationally and/or regionally accredited programs, so if the intent is to go after diploma mills, this is not a good proxy.  These places may provide programs that would not otherwise be easily available to people, even if the quality varies greatly.

We have already cut all federal loans, which for most for-profit colleges was the majority of their source of revenue.

The large for-profit universities and corporations will be paying a 45% rate under this bill (20% + 25% corporate tax). If I need to pull that up a few percentage points to get support for this bill, I will.

This bill encourages universities to invest more of their revenues in educational pursuits and to offer loan forgiveness programs.  The current policy does neither.

Finally, the tax in the previous bill affected more than just for-profits, so if nothing else let's fix that.

Diploma mills may be nationally accredited. Just look at the number of for-profit law schools that have sprung up in the last 10-15 years. They are nationally accredited, but their employment numbers and qualify of education are still garbage, but they are accredited because they are money making machines.

We can fix the issue where the tax affected more than just for-profits. I don't want to tax schools that are nonprofits.

I don't foresee any of this really affecting the price of tuition though. The real root of that problem is that higher education is now heavily subsidized by the government, and in turn, colleges have raised their tuition rates because there is enough demand for their services and easy money to pay for them. Unfortunately, I don't see this bill really changing all that much.

With that rant aside, I am fine with clearing up the language in the bill to make the tax affect for-profit schools only, because I really don't believe you need to be making huge profits off education.

[Fmr. Pres. Duke]

My assumption could be incorrect. I'm just going off my own knowledge of for profit educational groups that run schools. Many of these sprung up during the economic downturn to take advantage of all the people going back to school. If there are some reputable for profits, I will reconsider my position on them.

[Fmr. Pres. Duke]

Reinvesting back into the facilities has never been an issue for for-profits. The bill as it is is pretty much tailored to what they'd want to see out of us. They're known for having terrific facilities to divert attention away from their poor academic record. I have no qualms with what they spend their money on, typically their facilities are excellent, it's the product they put forward.

I am okay with the tax rebate for forgiving loans of students. At the very least, that will help the student out with the debt these for profits shoulder onto them.

[Fmr. Pres. Duke]

I am okay with the student loan forgiveness bit, but the rest just seems like we are trying too hard. The whole purpose of the tax is to discourage for-profit education. Giving these companies tax breaks for "investing in their institution" is an easy way out for them to avoid the tax because, like I said, these for-profits typically have wonderful facilities to distract people from their poor educational track records.

[Fmr. Pres. Duke]

I am okay with the student loan forgiveness bit, but the rest just seems like we are trying too hard. The whole purpose of the tax is to discourage for-profit education. Giving these companies tax breaks for "investing in their institution" is an easy way out for them to avoid the tax because, like I said, these for-profits typically have wonderful facilities to distract people from their poor educational track records.

These for-profits are typically either mostly on-line or in shopping centers.  Where I live community colleges have more impressive facilities. 

How is the tax supposed to discourage for-profit education?  I thought you said it doesn't increase the cost of tuition?   

I would hope that our purpose is to do something to try to keep students from being ruined by debt from for-profit schools, not just to limit their options as much as possible. Can you honestly tell me students will be worse off from this bill?  It seems like we are losing sight of the point.

The tax, from my understanding, was put in place to lessen the net income or potential profits from these for-profit schools, hence making the market less glamorous to enter. That is my understanding at least, I had no part of the bill we are trying to amend.

We could tax the profits of these institutions at a 50% clip rather than revenue. I am okay with that. I am simply worried that allowing them to invest in their facilities will be used as an easy way to shift profits elsewhere to avoid paying taxes. They can do things like upgrade faculty facilities but still offer a crap product. The for-profit legal education market works that way. Nice campuses, nice facilities, but their students are hopeless when they graduate. 

My biggest qualm is, I simply don't like for-profit schools and I don't know of any that are actually worth the money. I would be okay if they disappeared entirely, but I am not going to advocate or force that. People are free to do as they wish.

If you want to tax the profits at a 50% clip and keep the student loan forgiveness, I am okay with something like that. I need to think about the upgrades to the facility clause because I think that could easily be taken advantage of by these companies.

[Fmr. Pres. Duke]

Thank you.  I would consider accepting an amendment to address the facilities issue.  I just think in general we should treat revenue used to build up the academics and programs for students differently than shareholder profits or the like, and I want the language to be clear and comprehensive on that point. 

To demonstrate the problem we have right now, consider two for-profit colleges.  One is a complete diploma mill without any real classes and makes a 75% corporate profit on tuition, the other invests more in its students and makes 15%, and some of that is reinvested in succeeding years.  With an across the board 50% tax on revenue, the former will be the one that can still operate as it is because it is still making a profit .

I get what you're saying, but does a for-profit college exist that is not a complete diploma mill?

That is a half-serious question. I still want this bill to make it so that a for-profit educational venture is still not attractive to most companies. I may be biased (I am most certainly), but I just don't like anything that tries to profit off education.

But as I said, I will be flexible on the student loan forgiveness, because I want to help the students, and shifting the tax from the revenue to the profit.

[Fmr. Pres. Duke]

Moving to the center to run for President?

Campaign Speech in San Francisco

You wouldn't believe how many times I've voted on both sides of the issue because I have the interests of ALL Atlasians at heart.

Stop stealing my line. Not all of us can be hated by both sides of the isle.

[Fmr. Pres. Duke]

IS the 50% tax in addition to the 25% corporate tax the parent company of the school will pay? I think we said it was but I wasn't sure if we needed to include it in the bill.

[Fmr. Pres. Duke]

Would taking an additional 50% on their net profits be too much? I suppose I can support this regardless, but I wouldn't be opponed to the 50% being an additional for-profit education tax since we are now letting them invest back into their school before taxing their income.

[Fmr. Pres. Duke]

Would we be open to a redraft making the 50% tax an additional tax on top of the 25% corporate tax? The companies would still be able to invest in the students/facilities, and we could still put in this additional tax to limit for-profit education in the process. That way, it would give these companies incentive to invest in their students to lessen their tax burden.

[Fmr. Pres. Duke]

Would we be open to a redraft making the 50% tax an additional tax on top of the 25% corporate tax? The companies would still be able to invest in the students/facilities, and we could still put in this additional tax to limit for-profit education in the process. That way, it would give these companies incentive to invest in their students to lessen their tax burden.

That's fine, but can we then make it a 40% tax plus the corporate tax rates?

I could propose that, sure. Our corporate rates are much lower now than when we passed the initial bill, so I think we need to consider such a redraft. If we do a 50% on top of the corporate rate, it would be 75% on their profits.

That way, we could allow these for profits to invest in their school and still discourage them from springing up by taxing the hell out of their net income after net income.

[Fmr. Pres. Duke]

I'm redrafting. Get ready, boys.

[Fmr. Pres. Duke]

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This would leave a 70% tax on excess profits, assuming the corporation pays the 25% top level we just passed into law under Nix. Outside of investing in the students, I don't see why allowing a corporation to keep profits is necessary. I like business, and I like making money, but when it comes to education, I just have a thing about allowing someone to profit off it. Queue the harassment.

[Fmr. Pres. Duke]

Did you mean to say that profit is subject to a tax on its net profits?

I fixed it. It took me a while to remove all the amendment stuff, and I didn't read that clause correctly.