Saturday, April 12, 2008

C-J confuses a subsidy reduction with a tax increase

From the C-J editorialists this morning...

Kentucky lawmakers who claim they didn't raise taxes this year may be fooling themselves. But they aren't fooling the students at the state's public universities, or anyone helping those students foot the bill.

University of Kentucky was the first to reveal its plans for increasing tuition next year, and the number came in at 9 percent. That means costs will be bumped up another $717.50 in the fall, putting the total bill for instate tuition, housing, dining and mandatory fees at $13,572.50 a year.

Technically speaking, of course, that extra $717.50 is not a tax. But it feels like a targeted tax-increase on college students and their families.

So, here they acknowledge the reality, but apparently like the tax emphasis for rhetorical purposes. what flaky reasoning is it supposed to be more acceptable than some of the minor tax increases lawmakers could have chosen instead?

Now, there's the question (without the question-begging pejorative "flaky")!

For example, the Democratic-controlled House passed -- but then the Republican-controlled Senate refused to agree on -- an additional 25-cent-per-pack tax on cigarettes. Since everyone pays higher health-care bills because of smokers, it would make sense for lawmakers to give smokers an incentive to quit. But instead they gave economically deprived students an incentive to quit college, by putting the equivalent of a $717.50 tax on tuition....

So, tax the poor who disproportionately engage in smoking-- to help out a wide range of college students who are generally in the middle and upper-middle income classes, before and certainly after receiving the subsidy? The editorialists try to focus us on "economically deprived students", but the subsidy goes to all students. If you want to help the ED students, then targeted subsidies make much more sense.

And ironically, both cigarettes and college attendance are "price inelastic", meaning that people will tend to keep doing both, even in the face of significant price increases.

Lawmakers, in their determination to not increase taxes, did something worse. They increased the barriers to economic success.

Again, it would be more accurate to say that they lowered the subsidy rather than increased a barrier.

The other thing that begs noticing here is the damage that increased taxes would cause. The C-J seems to think that's a non-issue-- or at least a more modest issue than reducing a subsidy to the middle and upper-middle income classes.


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