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Congress Should Deregulate Private Universities, Not Regulate Them More

Although I am twice a graduate of Harvard, I have told my wife that any donation to my alma mater would signal senility. It is was a smug and illiberal place when I attended and its insularity and illiberalism have only grown since I graduated. The latest absurdity is to penalize students there for joining same-sex clubs that have no legal association with the university—originally on the false premise that these were places were women were likely to be assaulted and now on an ideology that claims the authority to direct students on the proper places to party.

Thus, it might seem that I would be sympathetic to a provision of a Republican bill on higher education that would prevent colleges from disciplining students on the basis of their membership in a fraternity or sorority.  But this legislation strikes at the heart of classical liberal view that private institutions, particularly those involved in education, should be able to determine their own programs and values, even if they do not sit well with the government. Different people have different views on how the next generation is to be educated: it is not for the state to decree one set of values.

This is true even of constitutional principles, like free speech, which some legislatures are considering imposing on private universities. While any administration that wants to create a great university should welcome a diversity of views on campus, this too is not issue for the government. The Bill of Rights applies to only state, not private, action.

Contrast this provision with those excellent provisions in the same bill that prevent government regulation of private institutions. For instance, the bill precludes colleges from being penalized such as by the loss of tax exempt status if they not condone same-sex relations. These anti-regulatory provisions are to be applauded because they provide space for religious and other colleges to educate students in an atmosphere that reflects their own values.

The strongest argument against the view that conservatives should not seek to regulate private colleges is that when the left gets power they are happy to do so. As a result government higher education policy becomes a one-way ratchet with left adding ever more onerous left wing policies when they get into power and the right adding none of their own. Indeed, as the Obama administration showed, it did not need new legislation to impose their will on private colleges. It just issued extravagant interpretations Title IX and other educational laws that did not go through notice and comment rule making but effectively bound universities who were fearful of losing federal funds.

But instead of imposing new regulations, the Republican Congress should disable future administrations from issuing such interpretive rules and instead making clear that colleges deserve deference in how they are to comply with whatever federal regulations are on the books so as not to interfere with their educational mission. Since most institutions like autonomy, this would have the advantage of making universities opponents of future efforts to eliminate such deference.

Harvard follows many bad educational norms. But the way to combat them is through sustaining freedom, not creating regulations.

Reader Discussion

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on February 09, 2018 at 10:32:34 am

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Congress Should Deregulate Private Universities, Not Regulate Them More | Top 100 Blog Review
on February 09, 2018 at 11:44:25 am

Many complicated, intertwined policy issues here. Let’s review the various levels of distinction.

While any administration that wants to create a great university should welcome a diversity of views on campus, this too is not issue for the government. The Bill of Rights applies to only state, not private, action.

Agreed. I would prefer that Harvard welcome a variety of views on campus--but Harvard, a private institution, has no duty to cater to my preferences. If we wouldn’t compel your church to permit alternative viewpoints, we shouldn’t compel Harvard.

That said, Berkeley (for example) is a PUBLIC institution. Thus, Berkeley may be subject to greater constraints than Harvard is. We must recognize the public/private distinction.

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nobody.really
on February 09, 2018 at 11:45:18 am

Contrast this provision with those excellent provisions in the same bill that prevent government regulation of private institutions. For instance, the bill precludes colleges from being penalized such as by the loss of tax exempt status if they not condone same-sex relations. These anti-regulatory provisions are to be applauded because they provide space for religious and other colleges to educate students in an atmosphere that reflects their own values.

1. Should there be a distinction between discrimination on the basis of sexual orientation/discrimination on the basis of other suspect categories? It’s not a hypothetical question: Bob Jones University v. US, SCOTUS held that the 1st Amendment does not shield a school from loss of tax-exempt status on this basis.

Of course, this ruling did not limit Congress’s discretion to shield schools for this kind of discrimination, and McGinnis cites a bill that would do just that—in part.

And it’s that “in part” that troubles me. I disfavor government discrimination on the basis of suspect categories. And, this bill seeks to avoid one kind of discrimination by creating another: It declares that discrimination against gays is somehow distinct from other kinds of discrimination. I’m not so into that.

I’d like to accord the same protections to (private) schools to exercise pedagogical discretion a/k/a to discriminate, without undue discrimination by government. In short, we should reverse Bob Jones (We should reverse Bob Jones in SO many ways, but for now I’m just referring to the legal precedent).

2. Indeed, I will again advocate “policy unbundling”—the idea that government is free to subsidize things it favors, but should not withhold those subsidies from those it disfavors for unrelated reasons. In Agency for International Development v. Alliance for Open Society International, Inc., SCOTUS held that government could not withhold grants from people who would otherwise receive them in order to extort profession of support for the government’s views. Whatever the merits of the grant, and of the views, they were sufficiently unrelated to justify making the one a condition of the other.

I would extend this principle. Government may want to support family farmers, and may want to discourage tobacco use. But it should not make its support for family farmers conditioned on the farmers discontinuing tobacco crops. Etc.

3. A last observation: We could avoid much of these concerns about government discrimination regarding tax-exempt status by simply eliminating tax-exempt status. Indeed, IRS Code 501(c) requires government officials to explicitly discriminate on the basis of religion, among other things. Moreover, tax-exempt status is just bad public policy. It conceals from the public the size of government subsidies. And it provides greater incentives to rich people to make charitable contributions that for poor people, which stands normal rules of motivation on their head. The policy is a mess from every angle, and should be put out of its misery.

If government wants to subsidize something, let it do so directly, explicitly, conspicuously, and constitutionally. We shouldn’t do it through the back door.

Admittedly, we’ve already taken a partial step in this direction: Under Trump’s tax cuts, many fewer people will have a tax incentive to make charitable contributions. It will be edifying to learn how this change effects charitable donations. If we learn that there really isn’t much of a drop-off, maybe Congress will be able to screw up the courage to finally rip off the band aid for good. (No pun intended, but now that I see it, it’s kinda cute.)

No, I don’t expect Congress actually will do this, but I can always dream.

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nobody.really
on February 09, 2018 at 11:45:50 am

Finally,

Although I am twice a graduate of Harvard, I have told my wife that any donation to my alma mater would signal senility. It is was a smug and illiberal place when I attended and its insularity and illiberalism have only grown since I graduated.

McGinnis’s sour perspective does not reflect the fact that he spent too much time at Harvard, but the fact that he didn’t spend ENOUGH time: He only earned two degrees there. But as any good inquisitor knows, you finally break people when you give’em the third degree. (Yeah, that pun WAS intended.)

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nobody.really
on February 09, 2018 at 14:48:07 pm

"...third degree."

Luvv'd it!

Then again, I suspect McGinnis was not a member of a fraternity; if so, he surely would have been subjected to the third degree. (see recent news from Harvard on all male memberships).

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gabe
on February 09, 2018 at 14:50:52 pm

Agreed - very sensible thoughts here.

"And it provides greater incentives to rich people to make charitable contributions that for poor people, which stands normal rules of motivation on their head."

But you lost me on this one.

Splain why - I am missing this. Is it simply "long form vs 1040 EZ? or something more substantive?

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gabe
on February 09, 2018 at 15:20:07 pm

“And it provides greater incentives to rich people to make charitable contributions that for poor people, which stands normal rules of motivation on their head.”

But you lost me on this one.

Why does the tax code provide greter incentives for rich people to make charitable contributions than poor people? When people make a donation to a 501(c)(3) organization, they can deduct the amount of the donation from their income (if they itemize their deductions in lieu of taking a standard deduction). The higher your income bracket, the more this is worth. Given our progressive income tax code, people with higher incomes have higher tax brackets. When someone earning $500K+/yr of taxable income donates $1, she gets $0.37 back in tax benefits. When someone earning $9500/yr of taxable income donates $1, he gets $0.10 back in tax benefits.

Why does this stand normal rules of motivation on its head? Economists say that there is diminishing marginal returns for everything, including consumption. Thus, we should expect to have to offer a larger incentive to induce poor people to forgo consumption and make a donation, than we would have to offer to a rich person. Or, for the non-economists on the blog, just read Mark 12:41-44, Luke 21:1-4. Yet our tax code provides the opposite incentive structure.

This is not merely nonsensical; it's pernicious. Because the list of charitable organizations under Section 501(c)(3) is so open-ended, donations can go for nearly any purpose. It's natural to expect that poor people might be inclined to donate toward things that help the poor, while rich people might be expected to donate toward things that help the rich. In effect the tax code's incentives cater more to the rich than to the poor.

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nobody.really
on February 09, 2018 at 15:56:59 pm

OK, as I suspected.

Cuppla questions:

Mark 12...

1) The widows copper may be said to be worth more than the rich mans gold.
Would the elimination of the deduction tend to a) reduce the copper but not the gold, b) reduce the gold but not the copper, c) reduce both OR d) (given the presumed *better intention* of the widow) maintain the copper but reduce the gold.

2) "In effect the tax code’s incentives cater more to the rich than to the poor."

Is there really ANYTHING to be done about that?
"Turning things on their head", it could be said that the tax code itself caters to the poor (I think you know me well enough to know that I am not arguing this) by taxing them at a lower rate, or absolving them of taxes entirely.
The variance in "deductive" worth is simply a straight line function of the difference in the assessed rate.
Are we to then limit the rich fellow's deduction to that provided to the poor fellow? or are we to disallow them entirely and as a consequence limit the total amount of charitable giving; presumably this would then need to be assumed by the gubmint, which in turn would then proceed to extract additional taxes from rich and poor alike.

ain't no way around - the Federales will take either copper or gold. (Hey sounds like the Olympics, if we throw in silver.

Anyway - good points you made.

seeya

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gabe
on February 09, 2018 at 17:12:28 pm

nobody.really:

We could avoid much of these concerns about government discrimination regarding tax-exempt status by simply eliminating tax-exempt status….

If government wants to subsidize something, let it do so directly, explicitly, conspicuously, and constitutionally….

In effect the tax code’s incentives cater more to the rich than to the poor.

gabe:

“In effect the tax code’s incentives cater more to the rich than to the poor.”

Is there really ANYTHING to be done about that?

Yes: We could eliminate tax-exempt status.

….Are we to then limit the rich fellow’s deduction to that provided to the poor fellow? or are we to disallow them entirely and as a consequence limit the total amount of charitable giving[?]

Exactly.

[P]resumably this would then need to be assumed by the gubmint, which in turn would then proceed to extract additional taxes from rich and poor alike.

1. Well, if government stopped giving tax breaks for charitable deductions, I’d expect that government would tax more income.

No, the amount that government would raise by eliminating the charitable deduction would not equal the amount of the aggregate donations. But we should not assume that elimination of the tax deduction would result in elimination of the donations.

It’s unclear how much the charitable donation motivates charitable giving. If you are really self-interested, it almost always makes more sense to refrain from making the charitable donation and simply keep the asset you would have donated. Thus, it appears that donors are motivated by charitable intent. Presumably that intent would remain, even in the absence of a tax deduction.

As I previously noted, the Trump tax code will give many fewer people a tax incentive for making charitable contributions. This sets up a natural experiment. We’ll soon see how much a tax deduction influences charitable donations.

2. And as I previously noted, government can choose to subsidize what it values—directly, explicitly, conspicuously, and constitutionally.

Ok, presumably government would NOT get into the business of subsidizing religion directly. But it should never have been in the business of subsidizing religion INDIRECTLY. By granting a tax deduction for religious donations, government has been using third parties to do indirectly the things that the Constitution forbids government to do directly. That’s a no-no.

And, for what it’s worth, I’m not wild about giving tax deductions to the Scientologists and the Christian Identity Movement (a/k/a the KKK). Those folks are free to have their own organizations, but they can do so without government subsidies, thank you very much.

While we’re at it, is it fair that Lifetime Fitness pays taxes for running a health club while competing with the YMCA, which is exempt? Is it fair that donations to put up a pro-choice billboard provide no tax benefits, but donations to a church to put up a pro-life billboard are tax-deductible? Competition is the American way, and government should not be skewing the playing field.

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nobody.really
on February 14, 2018 at 17:07:02 pm

But the Williams Lake band urged a higher standard of deference. “While judicial deference for the decisions of administrative tribunals is the law’s standard,” the band’s filing to the court said, “we submit that for the Specific Claims Tribunal, the reviewing court should go further and guard the tribunal’s decisions from undue interference … the very raison d’être of the tribunal is the hope, and the promise, that reconciliation between First Nations and Canada will be furthered by the work of this institution.

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teeturf
on March 15, 2018 at 07:06:47 am

[…] Should Deregulate Private Universities, Not Regulate Them More” [John McGinnis, Liberty and Law on bill to restrain colleges from applying discipline for membership in a fraternity or […]

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Image of Higher education roundup – John Culbreath
Higher education roundup – John Culbreath

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