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Trump announced in a tweet this morning that he directed the Treasury Department to consider removing the tax-exempt status of universities.
Too many Universities and School Systems are about Radical Left Indoctrination, not Education. Therefore, I am telling the Treasury Department to re-examine their Tax-Exempt Status…
— Donald J. Trump (@realDonaldTrump) July 10, 2020
The left-wing politics of university faculties has led many on the right to call for a kind of excise tax on education. But, as White House economists presumably know, the burden of taxation does not necessarily fall on the entity that pays taxes. If universities lose their tax-exempt status, they will make up for the cost by charging higher tuition fees.
If college students were responsive to costs, higher tuition costs would decrease enrollment, thereby decreasing the revenue of universities and curbing the “Radical Left Indoctrination” to which Trump objects. But if skyrocketing tuition fees have taught us anything (private, non-profit universities charge 129 percent more than they did 30 years ago), it’s that demand for higher education is more or less inelastic. 18-year-olds aren’t checking price-tags too closely when choosing colleges. In large part, that’s because the federal government guarantees student loans.
So the lion’s share of a tax on universities would likely be borne by students and the federal government — not Marxist professors.
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