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.
I see that the Canadian Centre for Policy Alternatives has just released a new paper by Hugh MacKenzie called The Impact of Taxation on the Higher Education Debates. It’s worth a read because it sets out the argument against higher fees in the most respectable terms possible – certainly more respectable that anything student groups themselves have come up with.
It is still, however, a pretty crap argument.
The spiel runs like this: the lazy talking point about how higher education subsidies mean that “the poor pay for the education of the rich” isn’t actually true. Our system of income taxes is quite progressive; the top income quartile pays about 69% of all taxes and the bottom quartile pays for just one percent. As a result, on a net basis, the bottom income quartile gains from the current system because they make up more than 1% of all university students.
MacKenzie is dead on about this. It’s where he goes from there which is problematic. He continues by arguing that its OK that subsidies for education, on aggregate, end up disproportionately with the children of wealthy families, because on average, the wealthy pay most of the taxes. Effectively, he argues that as long as the top income quartile doesn’t claim more than 69% of the expenditures of any program, and as long as the lowest income quartile gets more than 1% of the expenditures, the program is ipso facto progressive. And since higher education meets that test, it’s OK to spend more money on it.
This, to put it mildly, is an interesting definition of the term “progressive”. Education Savings Grants, which mostly go to the rich, would be considered progressive according to this definition. So, too, would the Bush Tax cuts (h/t Stephen Gordon).
Surely the relevant issue isn’t whether public subsidies can pass an unbelievably weak test such as this. The issue is how to ensure that subsidies are directed to those who need them most. This of course is what most people who argue for subsidy reform argue; higher fees for the rich, lower net fees for the poor through increased grants. For McKenzie this option is never considered; whether through ignorance or deliberate omission, he never mentions the billion or so in student grants which permit this kind of pro-poor price-discrimination.
MacKenzie self-righteously claims that anyone who disagrees with his views on progressiveness is just “appropriat(ing) the language of fairness” while “arguing against public policies whose goals include equalization of opportunity”. So be it. If arguing against providing rich families with bigger subsidies because they pay more taxes makes me anti-progressive, I’ll wear that label with pride.
The question is – why wouldn’t CCPA do the same?
The real problem Canada has with respect to the whole “does-education-pay” debate is data. It’s not that we don’t have people collecting data – we do, lots of them. The problem is that they’re all collecting data over time frames so short as to be largely meaningless.
The gold standard used to be the National Graduate Survey, which surveyed every fifth graduating class two and five years out. Now the 2-year survey is a year behind schedule and the 5-year follow-up has been discontinued. That’s right, folks – at the start of the recession, when Statscan took a look at their suite of surveys and decided which ones to can and which ones to keep, they decided that the one on medium-term educational outcomes was among the least policy-relevant and canned it. You know, so they could keep funding their monthly poultry storage reports .
For about a decade now, a number of provinces (all except MB, SK and NL) have started collecting data too; indeed, they have been doing so on a biannual basis, which is much better than Statscan could ever manage. However, most only track them out to 24 months, so the issue of long-term outcomes is still unaddressed. BC is the only province which does 5-year reports, and they’re quite interesting (more about them tomorrow).
The long-term outcomes of degrees and programs clearly matter a great deal. So why can’t we measure them? Cost, mainly. Anything further out that about 24 months is expensive to do well (BC’s 5-year response rates are disappointing, for instance), and so – penny-wise pound-foolish nation that we are – we don’t do it.
But there actually is a very cost-effective way to do this; namely, to link student records to tax records. Virginia, Tennessee and Arkansas have already linked their grads’ data to unemployment records and others seem poised to follow. In Canada, we could quite easily do the same thing by having Statistics Canada link its Post-Secondary Student Information System (PSIS) to the T1 family file. Instantly, with no new data collection expenses, you’d have income data by institution, program of study – what have you – as many years out as you like. As always with Big Data, there are some privacy concerns, but frankly none of them are very convincing, certainly not compared with the major public policy gains available.
Linking administrative databases is cheaper, faster and more accurate than what we do now. Why we haven’t moved to this system already is one of the biggest mysteries in Canadian higher education policy.