HESA

Higher Education Strategy Associates

Peas in a Pod

A few weeks ago, there was an absolutely hysterical story on CBC about a Fraser Institute report on carbon taxes.  You can read the article for yourself, but the argument was basically this: carbon taxes are bad because they would have a disproportionate effect on people in lower income brackets.

Assuming you believe the Fraser Institute actually gives a rat’s hairy behind about people in lower income brackets, this is not an entirely stupid point; multiple studies in the US have come to this conclusion. But it depends quite a bit on the design of the tax: if you use part of the revenue to fund lump-sum transfers to poorer families to offset the effects of the tax, one can actually develop a tax which is relatively progressive (see this paper from Resources for the Future for some simulations on the incidence of different types of carbon taxes).  So yes, if you design a bad carbon tax, it probably will have regressive effects.  But design a good one and you’re off to the races.

You may at this point be asking yourself “why is Alex droning on about carbon taxes in what is ostensibly a higher education blog”?  Fair question. And the answer is: because the Fraser Institute’s argument about carbon taxes is EXACTLY the same as the CFS/CAUT/Usual suspects on the left argument against tuition.  Fees are seen as regressive because they represent a higher proportion of family income to the poor than the rich (see here for example)

Now, if we believe that CFS and the usual suspects on one side and the Fraser Institute on the other both actually believe their own argument, then we have a possibility of some radical political re-alignment in Canada.  The hard left should oppose carbon taxes, the hard right should oppose tuition fees – after all, who would want to hurt the poor?

But, as you may suspect, that isn’t the whole story.  In precisely the same way that the Fraser Institute assumes away any sensible attempt to hold the poor harmless for a carbon tax through rebates or transfers, the usual suspects on the left completely ignore grants and scholarships as an offset to tuition fees, and so exaggerate – and occasionally entirely misrepresent – the actual distributional impact of net tuition.  One of the reasons I was so pleased last year about the Government of Ontario’s decision to make net tuition “free” for low income students was not so much because it improved students’ welfare (net tuition was already less than zero for many thousands of students), but precisely because it makes this rhetorical BS harder to maintain.

Anyway, even if students grants or energy tax rebates didn’t exist, objecting to putting a price on something because any non-zero price “impacts the poor more than the rich” is insane.  You could object to every product in a market economy that way: beer, popcorn, baby formula, pistachios – they all “impact the poor more than the rich”.  The point is to raise incomes at the bottom to help people purchase more goods at less of a burden, not get rid of the price mechanism.  You’d think that a right-wing pro-market think-tank might actually grasp that.

But then of course, said right-wing think tank does understand this.  Their argument is an argument of convenience and not conviction.  In the service of defeating carbon taxes, no argument is too stupid to make.  As is the case for the usual suspects and their hatred of tuition.  Peas in a pod.

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3 Responses to Peas in a Pod

  1. Joe says:

    Hilarious. Will you be reviewing Games of Loans and/or Sandy Baum’s new book?

  2. Joel Harden says:

    Hi Alex, I hadn’t read this until you were trolling CFS sites today.

    Took you a while to get the point here — from a stylistic perspective, I’d suggest putting your thesis earlier.

    On a more substantive level, I wonder when a future blog post of yours will be devoted to ensuring we get rich kids out of public elementary education, secondary education, and health care. The next non-member of the deserving poor to frequent an emergency room must be turned away. We need a tea party revolution to set our public finances straight.

    Back to reality now, at some point you must reckon with the fact that PSE training (grasped in its widest sense, including skilled trades, college, and university education) is required for a decent life, and should therefore be available without upfront cost.

    How do we pay for it? Through a more progressive system of income tax, not arbitrary, up-front fees. We tax people to pay for PSE while they earn, not while they learn.

    The free tuition = “regression” case gets less persuasive by the day. Yes, our PSE system (particularly the university sector) is disproportionately utilized by upper income earners, but that doesn’t invalidate the case for free tuition: the status quo isn’t working. We need a re-boot.

    But it might be harder to build a thriving HESA consultancy in a zero tuition system, without the need to justify competency in knowledge about byzantine bureaucracies of patchwork student aid, multi-source funding models, and platinum-level salaries of top campus officials. That’s the real point here, isn’t it?

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