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How Should Education Be Taxed? An Ohio Bill Pitches Some Interesting Ideas

December 10, 2021 By john

Taxing colleges has been making the news again thanks to a bill pitched by Ohio lawmakers to “Grow Ohio.”

For anyone out of the loop, Ohio is at a crossroads. For the first time in the state’s history, their death rate exceeded the birth rate. This has caused numerous lawmakers and politicians to consider what resources are available to them to grow the state’s economy and grow the population. One area that’s moseyed into lawmakers’ crosshairs is the education sector.

How is education taxed now?

Education has an interesting track record with taxes. On the one hand, these are multi-billion dollar institutions that often hold onto their donations and assets — removing funds from the economy — and on the other, they don’t pay capital gains. So this is one of the reasons why they’re coming back into the forefront. We’ve seen “tax the rich” gaining momentum — at least in the news cycle — and for all intents and purposes, universities are no different. Universities, in some regards, are better off since they don’t need to pay capital gains taxes either. The Washington Post sums this up succinctly:

[I]f Gates made $100 million in trading Microsoft stock, he would pay $23.8 million in federal capital gains tax… If the Bill and Melinda Gates Foundation made the same $100 million trading the same stock, it would pay a mere $1.4 million.

-Henry Olsen, Washington Post

So why do we care so much about people, why not institutions? Being accepted to a university is one hurdle. Afterwards, paying for it is another.

Many aspiring scholars struggle with student loans and financial aid and if universities were incentivized to spend their income, this could achieve a net positive effect. Of course, getting any traction on this is slow, but Ohio may have found a workaround given their predicament.

Ohio bill wants to eliminate income taxes for 3 years

In an effort to grow Ohio’s population, support college education, and keep the economy moving, the bill would put a moratorium on income taxes.

A main reason Ohio is struggling is due to youths getting an education and finding a job elsewhere. Removing income taxes for those that find a job in Ohio would encourage people to stay. Additionally, they’re considering numerous out-of-state tuition benefits to bring scholars to the state.

It’s an interesting piece of legislation and brings up numerous talking points regarding taxes and education. If this Ohio bill passes (in some form or another), it may be indicative of changes to come. With the Pacific Northwest housing market being what it is, pausing income tax could go a long way. It’s only a matter of time before we need to incentivize younger people to come into Seattle — rather than boxing them out.

Photo by Susan Q Yin

Filed Under: News

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