Why Republicans Want to Tax Students and Not Polluters

Posted on 09 July 2013

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Author Robert ReichBy Robert Reich

A basic economic principle is government ought to tax what we want to discourage, and not tax what we want to encourage.

For example, if we want less carbon dioxide in the atmosphere, we should tax carbon polluters. On the other hand, if we want more students from lower-income families to be able to afford college, we shouldn’t put a tax on student loans.

Sounds pretty simple, doesn’t it? Unfortunately, congressional Republicans are intent on doing exactly the opposite.

Earlier this year the Republican-led House passed a bill pegging student-loan interest rates to the yield on the 10-year Treasury note, plus 2.5 percentage points. “I have very little tolerance for people who tell me that they graduate with $200,000 of debt or even $80,000 of debt because there’s no reason for that,” Rep. Virginia Foxx (R-NC), the co-sponsor of the GOP bill, said.

Republicans estimate this will bring in around $3.7 billion of extra revenue, which will help pay down the federal debt.

In other words, it’s a tax — and one that hits lower-income students and their families. Which is why several leading Democrats, including Senate Majority Whip Dick Durbin, oppose it. “Let’s make sure we don’t charge so much in interest that the students are actually paying a tax to reduce the deficit,” he argues.

(Republicans claim the President’s plan is almost the same as their own. Not true. Obama’s plan would lead to lower rates, limit repayments to 10 percent of a borrower’s discretionary income, and fix the rate for the life of the loan.)

pollutionPhoto credit: U.S. Fish & Wildlife Service

Meanwhile, a growing number of Republicans have signed a pledge – sponsored by the multi-billionaire Koch brothers — to oppose any climate-change legislation that might raise government revenues by taxing polluters.

Officially known as the “No Climate Tax Pledge,” its signers promise to “oppose any legislation relating to climate change that includes a net increase in government revenue.”

By now 411 current office holders nationwide have signed on, including the entire GOP House leadership, a third of the members of the House as a whole, and a quarter of U.S. senators.

The New Yorker’s Jane Mayer reports that two successive efforts to control greenhouse-gas emissions by implementing cap-and-trade energy bills have died in the Senate, the latter specifically targeted by A.F.P.’s pledge.

Why are Republicans willing to impose a tax on students and not on polluters? Don’t look for high principle.

Big private banks stand to make a bundle on student loans if rates on government loans are raised. They have thrown their money at both parties but been particularly generous to the GOP. A 2012 report by the nonpartisan Public Campaign shows that since 2000, the student loan industry has spent more than $50 million on lobbying.

Meanwhile, the Koch brothers – whose companies are among America’s 20 worst air-polluters –have long been intent on blocking a carbon tax or a cap-and-trade system. And they, too, have been donating generously to Republicans to do their bidding.

We should be taxing polluters and not taxing students. The GOP has it backwards because its patrons want it that way.

Robert Reich is Chancellor's Professor of Public Policy at the University of California at Berkeley, was Secretary of Labor in the Clinton administration, and has written thirteen books, including the best sellers Aftershock and The Work of Nations. He is also a founding editor of the American Prospect magazine and chairman of Common Cause, who blogs regularly on national affairs. This article was originally published at Robert Reich's site.

Another way to look at this is by reducing funding of college loans maybe the republicans want to reduce the number of english and anthropology majors that couldn't get funded in a market oriented loan program. And, maybe, by not taxing people using fossil fuels that want to encourage business and employment. Thus, you would get less unemployable college grads and more jobs?

It is only fair that students pay interest on their loans. What the correct amount is up for debate. Actually the whole student loan program should be reviewed. Some students take out loans that they don't really need, because it's "cheap" money, and they figure that down the road their loans will be forgiven (as Obama has suggested)

Maybe Congress could pass some rules about how much higer ed could charge in tuition. Legislation is also needed that would regulate what public universities could pay administrators and other personnel. E.g., at UC Berkeley the head football coach makes over $2 million. And the top people make salaries in the high 6 figures.

Ideally, academically qualified students who are persuing a valid major (not athelets!) and maintain good grades should be able to attend higher ed without any tuition or fees. This is the paradigm found in many other countries

The idea of regulating tuition seems appealing but it is not practical. The way to lower tuition is to cut support student loans and make the consumer of education make rational economic choices. This will allow the marketplace to reward those universities that maintain cost control.