More Tax Breaks for the Rich?

I was talking with some folks at LSU who were working on a proposal to exempt textbooks from sales taxes in Baton Rouge, currently a whopping 9 percent. I’m all in favor of cutting sales taxes, which are generally not progressive; but textbooks are a luxury good because college education is disproportionately undertaken by the offspring of higher-income families. Why subsidize higher-income college students still further?

The elasticity of demand for textbooks is probably quite small; profs assign the same number of textbooks and students used to buy them locally. With more students purchasing textbooks online today, the elasticity is probably much higher locally. There was little excess burden before; and with the expansion of the Internet the burden is still small, since people can escape the tax with minimal effort.


charles

A reduction in tax isn't a subsidy. Just like taxes are not "revenue." As a former poor (monetary) college student I'll use my right to the anecdote to take issue with the use of the concept of the "average" demographic.

Michael

Why are text books, which are largely profit makers for book companies and fraught with many ethical concerns (teacher requiring their books be used) taxed at such a high rate? It is no wonder the used book market has become so creative.

Noah

couldn't you make a reciprocal argument (to your first paragraph, not the second) that by removing costs (even seemingly minor ones) makes college less likely to be reserved for higher income families?

Furthermore, there is a local incentive being created here in that local bookstores probably are losing a lot of college-related business to the internet but might be able to get some of that back (and keep their staff employed and pay taxes on payroll & net company income) by creating a more even playing field with their online competitors. From a legislative perspective this really could accomplish several things at once- marginally increase college attendance (or decrease the debt load of college students - and keep in mind this probably covers vocational & community schools which don't skew to the higher incomes the way 4-year colleges do) and provide a small measure of support for local employers.

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Mike

Just because a person is in college doesn't necessarily mean their parents are paying for anything.

Scott W

"Textbooks are a luxury good because college education is disproportionately undertaken by the offspring of higher-income families. Why subsidize higher-income college students still further?"

In other words, "Try to discover what kind of people buy a thing: if those people are rich, tax the object. If they're poor, don't tax the object." The reason this way of thinking amuses me so much is that it nearly always has the opposite effect of what academic policy-makers intend.

All this does is put higher education even further out of reach of the financially disadvantaged. This is the problem with statistics: you get a number (e.g., your adjective "disproportionately" is the result of some arithmetical mean I assume) and so instead of discriminating ("hey, let's try soaking the rich directly through income taxes again!"), we discriminate not at all and soak everyone equally who tries to better their life through education.

There are a few reasons that poor people don't go to college, one being cost (all reasons need to be addressed, of course), but textbook costs is one of the reasons we can easily fix, don't you think?

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Daniel

You make an interesting point, but at the same time there are plenty of lower income people who lack the funds to attend college. In that context, finding ways to reduce the costs of attending college seems important if we want to promote higher education across a wider section of the population.

There are some ways that this could be done while targetting those who need it most. Waiving the tax for students getting Pell Grants or financial aid (thus ensuring that they are lower income) is an example. As is providing high quality affordable student housing, and income-qualifying the incoming residents.

Todd Hadden

Since LSU is a state school aren't requiring text books themself a tax? As long as schools and teachers themself profit from the textbook they will require higher and high priced book with no more info for the students. why does a calculus book need to be updated the science is 400 years old.

Lynn

The quality of this column has gone down considerably and this post is no different. This is the last entry I will be reading and I am removing it from reader feed.

Fred T.

Until a $100 textbook is used more than a handful of times by the assigning professor and/or is worth more than $20 when being bought back by the bookstore, I'm all in favor of tax breaks on textbooks.

Maybe then, all those college students that don't fit into the majority can afford more than Ramen noodles.

Ken Arromdee

How can you claim that "with the expansion of the Internet the burden is still small, since people can escape the tax with minimal effort"? Buying an object out of state and importing it without paying the use tax (which comes out equivalent to the sales tax, of course) is against the law. You're basically saying "the burden on students is small because the students can break the law to escape it". Huh?

Donnie

"higher-income college students"

I don't know many college students who have any significant amount of income; I sure didn't. They may have some kind of deferred wealth in the form of an inheritance, but that does not mean they are currently rich or higher-income.

Colin

Even if college education is disproportionately undertaken by the offspring of higher-income families, a tax exemption would be more beneficial for for lower-income students as it leaves a higher percentage of their income available for other things. The $45 or so of tax added to the purchase of text books will have much less impact on students whose wealthy parents pay for their books than students who have to work to pay their own way though school. If this tax break were aimed at higher-income students it would be directed only at new text books which are more expensive instead of indiscriminately subsidising everyone. The tax exemption is probably more of an attempt to keep students spending in Baton Rouge instead of Seattle (Amazon's HQ). Furthermore, I think of this tax exemption as a tax break on education, not a subsidy for the rich, and I certainly have no issue with encouraging education.

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rc

@Michael(#2): actually, the 9% is the local sales tax rate here in BR, so it is not just the textbooks that are getting taxed heavily.

mfw13

How about doing away with textbooks altogether?

In most cases, the exact same information that is contained in a textbook is available for free somewhere on the internet.

cla

Textbooks are an obscene racket. I've been buying them for the past 14 years as my kids went to private school and then college. Every couple years a new edition appears which means parents/school districts are "required" to buy so they have the most up to date information. Complete nonsense! I would be happy to spend a few bucks for an update which could be downloaded.

My first place to go to buy textbooks is "used" on line. There are many companies around. I don't pay any tax.

Not spending big $$$ on new textbooks is a way every school in the country can save money. If your kids go to public school, you probably have no idea how much money your school spends on books. I encourage you to ask. You will be surprised.

Mike B

Anyone who pays local sales tax on a textbook is just being doubly stupid for A) paying retail price at a brick and mortar store and B) getting charged sales tax on the same.

Buiy online, used or peer to peer and not a cent in tax you will pay. A sales tax exemption for textbook sales is about as useful as a chocolate teapot. I have no problem on taxes that punish stupidity and this is no exception.

(BTW, this proposal was probably suggested by bookstore lobbying groups that are being devastated by online sales and has little to do with helping actual taxpayers.)

Crust

"[T]extbooks are a luxury good because college education is disproportionately undertaken by the offspring of higher-income families"

That's pretty weak reasoning. The percentage of income spent on textbooks is surely a decreasing function of income.

Sure, the absolute amount spent increases somewhat with income (because kids of wealthier families have a higher attendance rate), but then again the same is true of food or cars, probably more so. Do you consider food and cars to be luxury goods also?

TsaiCMS

This is one of those situations where one must choose between efficiency and equity. As economists we know that it is at its best without the interruption of the government, but I believe that in this case the taxes should remain for the textbooks. It is fair to tax people for something they an afford, but maybe, as a compromise, lower the tax rate at which the books hold. This would benefit everyone, including poorer families trying to get their kids into college, higher income families saving some money, publishers getting more new books bought instead of the alternative (old books), and even the government wins in this situation. People who were avoiding paying taxes or buying in places where taxes are lower by buying online may now be indifferent about the lower tax rate, and would value their time more than the effort to buy the book online, so they would buy their books locally.

Jason S

Ok first off...ALL tax breaks are for the rich...because they are the only ones paying taxes. The poor don't pay income taxes so giving them a tax break doesn't help. Which is why sales taxes are actually very progressive and very useful as well. You only get taxed on what you spend and many of your transactions are tax free. You don't pay sales tax on your rent or you power bill so you pay that out of gross income rather than net like you do in an income tax. I loved living in TN for that reason, even though we had a 10% sales tax. There were plenty of opportunities made to help the poorer get around this as well with tax free days for getting ready for back to school season and the like.
To the matter of textbooks themselves, local shops need anything they can do to compete with online markets and if that means no sales tax then that makes plenty of sense to me. This also help those students who have less money, namely all of them, get these books cheaper and perhaps in some cases get them to make a local purchase instead.
Depending on the textbook and the time there isn't much price difference in online and local stores prices, though I have taken advantage of the opportunities there are for sure.
Lastly, textbooks are in no way a luxury good and the fact that it is being presented as such on here is sad actually. To make the arguement that it is just the rich kids going to school so therefore don't help them out is not only wrong, it is abhorable. As a teacher to make that claim ignoring all facts and the many factors that come into play in an education is just sad. Things like the fact that higher income kids are more likely to seek further education because of the emphasis on education they are raised in rather than daddy has a big checkbook. But that doesn't mean they get a blank check either.
Anything that can bring downt he cost of a good education is a good thing...regardless who takes advantage of it or who else might get helped in the process. If it helps...do it.

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JeffW

Well, it's hard to give the poor tax breaks, because they hardly pay taxes int he first place, In 2007, the top 1% of U.S. taxpayers paid 40% of the federal taxes, while the top 5% paid 60%. The bottom 50% paid less than 3%. It's the rich that pay for almost ALL the taxes. They deserve every break they can get. It would be much more democratic if everyone either paid the same tax, or if one could get one vote for each dollar that one pays in taxes. Then there would be a direct connection between the cost of our taxation and the price of our representation.