Saturday Shorts: Theirs
Why corporations dodge taxes
Teresa Tritch in The New York Times: In and of itself, the top rate, 35 percent, is not the issue, because what corporations actually pay, after all their write-offs and other shenanigans, is far less than that and basically in line with what corporations in other advanced nations pay. Bill Clinton said he favors getting rid of corporate tax loopholes while lowering the rate, which may be a good idea in theory but is a nonstarter in practice because corporations have fought for decades for the loopholes they live by and will continue to fight for them; for all the talk about getting rid of loopholes in exchange for lowering the rate, neither politicians nor corporate leaders have ever specified loopholes whose closure would raise anywhere near enough money to lower the rate significantly.
If Clinton really wanted to get to the root of the problem, he would challenge the dubious policy that allows corporations to shift and stash profits into foreign accounts, where they remain untaxed until the corporation brings them back to the United States. Why do corporations get unlimited open-ended tax deferral? Everyday Americans don’t get unlimited open-ended tax deferral on the trillions of dollars they set aside in retirement accounts. There are limits on how much can be set aside and for how long. The Treasury always gets its cut; it knows with a fair degree of accuracy how much it is going to get and when.
The problem with for-profit colleges
Catherine Rampell in The Washington Post: For-profit colleges can’t get no respect, at least not from employers. Which suggests that maybe they should be getting less generous taxpayer subsidies, too.
For-profit schools — ranging from monolithic online chains like the University of Phoenix to smaller, fly-by-night operations that advertise on the subway — enroll about 12 percent of college students nationally. Yet they account for nearly four times that share of student-loan defaults, according to newly released federal data. The typical explanation for the high default rates involves the fact that so few students actually graduate. Many end up with substantial debt but not the credential required to help them get a job — you know, the thing they explicitly went into debt for.
But it turns out that dropout rates aren’t the only reason this sector’s default rates are so high. The lucky few students who actually complete their degrees have serious trouble getting jobs, too.
As described in a new working paper, researchers sent out nearly 10,000 fictitious resumes in response to online job ads. Holding job experience constant, they varied a few other details, including the kinds of institutions the imaginary applicants graduated from. Then they tracked which applicants got e-mails or phone calls inviting them to interview or otherwise continue the application process.
Lo and behold, applicants with a bachelor’s degree in business from an online for-profit school were about 22 percent less likely to get a “callback” than applicants with similar degrees from nonselective public institutions. Applicants who graduated from small local brick-and-mortar for-profits were also less likely to get a callback compared with those with degrees from public schools, though the difference was not statistically significant.
It’s unclear why employers were less interested in graduates of for-profit colleges. Maybe bosses associate for-profits with lower-quality education, or perhaps with a lower-quality student body. (The for-profit sector always protests, after all, that its dropout rates are so high because it takes more at-risk, nontraditional, underserved students.) Either way, the brand isn’t a good one.
The economics of civil forfeiture
Zach Weissmueller in Reason: “When you give [police] the power of civil asset forfeiture, they’ve got to choose between themselves or the public,” says experimental economist Bart Wilson. “Why do we want to put them in that position?”
Civil asset forfeiture is the process whereby police seize any property or money associated with a suspected crime, often drug-related. If the owner wants the seized property back, he or she must spend an often considerable amount of time and money to prove in court that the property wasn’t used in the commission of a crime. As Jacob Sullum explained earlier this month, it’s easy for innocent third parties to lose thousands of dollars in the process.
In many states, the law permits police departments to auction off the seized assets and keep the cash. Critics say this system incentivizes “policing for profit” at the expense of innocent members of the community, while proponents argue that it motivates police officers to do their jobs better and funds police departments by “taxing criminals.”
Wilson, a professor of economics at Chapman University, and his co-author Michael Preciado designed a study to reveal how the incentives set forth under civil forfeiture affect human behavior. In the study, one undergraduate student plays the role of law enforcement in a computer game, and three others play the roles of the public. Subjects played for real money, and Wilson says the results were overwhelming.
“It’s not a few people just abusing it. This is the modal tendency: to abuse,” says Wilson.