Daily Archives: 13 December 2017

Of Course They Are

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Universities and businesses are objecting to losing the tax-exempt status of tuition assistance, tuition that the universities receive in exchange for pretending to educate our youth and that businesses provide as an employment perk.  The House version of the tax bills currently in the offing eliminates this exemption status.

Hewlett Packard Enterprise Co, Starbucks Corp, and others say offering tax-free tuition assistance makes it easier for them to keep and train employees.

Schools say they could lose thousands of students if the tuition program is taxed. The nation’s economic development would be stunted if employees shy away from pricey training programs, they say.

Both groups are being disingenuous.  If everyone loses the exemption, no business gains an advantage, and so there is no hit to competition in keeping and training employees.  The businesses just have to make their decisions in this arena based on what’s truly good for the business and not on what works based on Government involvement—those taxes.

The schools won’t lose much either, other than students for whom college isn’t the best choice, anyway.  If their training programs are pricey, too, well, the answer to that is both obvious and wholly within the purview and capability of the schools to effect.  The exemption of tuition assistance from taxation, after all, is nothing but a subsidy, and so it contributes to inflating the price (not the cost) of the programs involved.

Tuition assistance is income; of course it should be taxed, as should all income regardless of source.  The questions here are whether income will be taxed at a low rate—as it should be—and whether our tax code, including tuition assistance being exempt, should be used for social engineering—as it should not be.

“major distortive impact on international trade”

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That’s the claim of European nations–Germany, France, Italy, Spain, and the UK—as they worry about the drop in corporate tax rates that the House and Senate bills propose.

Well, of course.  They also don’t like the highly competitive tax rates applied by Ireland and Luxembourg and routinely excoriate those nations for having the temerity of competing via tax treatment for business.  While the nations bleat about double taxation and how European businesses operating in the US would be at a tax disadvantage compared to US companies operating in the US, here’s the nub of the thing:

Even without those provisions, the reform would leave US businesses facing lower domestic-tax rates than some of their European peers, putting governments under pressure to reciprocate.

The horror.  And those nations—and the EU generally—still have not justified either their high tax rates or their high spending rates that underlie those tax rates.  The nations also have exposed their hypocrisy:

[T]he proposed “base erosion and anti-abuse tax provision” contained in the Senate bill could harm international banking and insurance businesses because it would treat cross-border financial transactions between a company and a subsidiary as nondeductible, subjecting it to a 10% tax[.]

Never mind that the EU already is attacking the international banking industry (and the insurance industry won’t be far behind) by demanding a tax on all financial transactions (currently masqueraded as a tax on investment transactions, but what else does an international bank do?), which itself can only depress international banking.  But hey, it’s a tax, so it’s all good.  Or so insist the Know Betters of EU Big Government.

The UK’s concern is especially interesting both as that nation drifts away from Thatcherism, even in its allegedly Conservative coalition and as the UK stands to make out like bandits in international trade following Brexit and the loss of EU fetters on its economy (always assuming the timid May government doesn’t surrender the farm in the face of EU intransigence).