With their endowment above $50 billion, combined with Federal plus Non-Federal sponsored revenue at 16% of operating budget, it makes sense to me they just forgo Federal funds and operate independently.
If all 16% is canceled, then they'd need to draw an additional $1 billion per year from endowment at current budget levels.
That would put them above 7% draw so potentially unsustainable for perpetuity, historically they've averaged 11% returns though, so if past performance is a predictor of future, they can cover 100% of Federal gap and still grow the endowment annually with no new donations.
Republicans Are Floating Plans To Raise the Endowment Tax. Here’s What You Need To Know : https://www.thecrimson.com/article/2025/2/11/increasing-endo...
Proposed College Endowment Tax Hike: What to Know : https://thecollegeinvestor.com/52851/proposed-college-endowm...
College endowments are typically tax-exempt, but a 2017 law imposed a 1.4% tax on investment income for a small group of wealthy private universities. A new proposal seeks to increase the endowment tax rate to 14%
proposing an 8.6 percent tax hike
>A new proposal seeks to increase the endowment tax rate to 14%
That would be great that Harvard pays %14 on investment income on its 50 billion fund, considering I pay a minimum of 20% on my 'way less than $50 billion' in taxable investments, which was funded by my already taxed earnings, where as Harvard gets much of its endowment funds gifted to it.
But I don't understand why 14%? It should be the same as you, 20%.
Same goes for religious organizations, but it would be extremely hard to enforce, as they might say "government is interfering us practicing our religion", as practicing religions helps to not pay taxes and protected by the Constitution.
>But I don't understand why 14%? It should be the same as you, 20%.
Taxing donations is really thorny. If people realize that the government is taking money they want to give away... they stop giving away money. It's a self-terminating cliche in action. So you either leave it alone if you want to encourage people stimulating charities, or you make the tax very small.
>Same goes for religious organizations,
I don't fully know. Some attempt at separattion of church and state. The government tries to maintain that except when other boundaries are crossed.
It does sort of fall into the same umbrella though, when regarding tithes.
There are several proposed bills, including one that raises the tax to 21 percent.
https://nehls.house.gov/sites/evo-subsites/nehls.house.gov/f...
if your argument is "but they're not getting screwed equally" then its a completely flawed argument benefiting the government
you should be questioning why you are getting screwed at all. it doesn't solve the government's revenue problems or even make a dent.
People already paid their taxes on all of the principal before they donated it to fund education. You and I are not chartered as an educational endowment; things like Roth IRAs exist for us.
> People already paid their taxes on all of the principal before they donated it to fund education
That's not true, the donations are tax exempt (deductible).
I think the point is that money for many was taxed before the paycheck ever came in. And you have no control over it. Part of your W-2 goes to fund social security, part of it to fund the federal, part of it to fund the state.
Taxing donations is just double dipping on your money. That's how you discourage donating.
"funded by my already taxed earnings"
Why did you even try that? Blew your whole argument.
why do you disagree? Most people working a job do have taxes taken out. That's why you get a "return" when the IRS realizes they took too much or you provide other means to deduct your taxes.
The comment attempts to suggest that something is being taxed twice. It is not. The original income that funds some investment is taxed. After that, only further income is taxed. The existing principle is not.
Nothing that was taxed was "already taxed".
Eh, colleges were originally religious institutions. (Harvard was founded to train clergy [1].)
Converting the Corporation to Harvard Church is about the least shenanigany thing I could think of in this tale.
[1] https://en.wikipedia.org/wiki/History_of_Harvard_University
This is genius. Next up, Apple could easily convert into a church with its many disciples.
And this is why I believe governments should tax nonprofit organizations!
In France, we ran an NGO whose music festival got a bit big… a million or two of beer sales. Tax office came in and put that part of the NGO under the business rules, ie we paid and received VAT, paid the corporate tax at the normal rate, etc. We ended up putting the entire charity under the business rule because it was more profitable (saving VAT on all providers, while our donations were exempt of VAT).
I’m surprised USA doesn’t have a rule that industrial/commercial sections of any org is liable to all corporate tax laws.
we "sorta" do. It's an all in or all out matter with 501c3's. You declare a non-profit and essentially all your money needs to be funneled back to the company. There's many other regulations to prevent the most obvious means of fraud.
No skin in the game, but curious to know why any Republican would want to raise taxes. Is this some sort of power play like the tariffs? Feels like they’re ghost riding the economy for the lulz.
They don't care about taxes - they are happy to implement regressive taxes that disproportionately burden the middle class and poor, such as sales taxes, Social Security, etc. They just don't want to pay taxes themselves.
> They don't care about taxes - they are happy to implement regressive taxes that disproportionately burden the middle class and poor, such as sales taxes, Social Security, etc. They just don't want to pay taxes themselves.
A very large portion of the country vote Republican, and I would be surprised if they are by and large the most well-off part of the American public.
The voters are not the party and the party is not the party leadership. The actual policies that end up being supported have little-to-nothing to do with the stuff that gets talked about while campaigning, and this only gets more true the further away from the actual voter the position is.
Yeah. You can implement any policy you want if you can always blame the other party for it (and have your voters eat it up).
These voters were scammed. Many still don't realize or believe this, and they avoid real news for the purpose of keeping faith in the easter bunny they voted for.
And you are right... that's why "The Party" instead appeals to "the party" with various single issues (you know all the hot topics) and implement (or perhaps, pretend to implement) those while the real bills "The Party" want are passed under their nosess. "The Party" spends a dollar on "the party" while grabbing hundreds from the vault they all pitched into.
Worked for decades. Not so well when Trump so publicly tanked the economy and snatched one of the 3 untouchable things.
It's about punishing their enemies.
> Feels like they’re ghost riding the economy for the lulz
Yes. The abstract of "the economy" doesn't matter. The priorities are "owning the libs" on Twitter and other media, and their own personal bank accounts which can benefit from insider trading the tariffs, state-sponsored memecoins and so on.
Easy, Harvard is essentially a training center for their ideological enemies on top of providing an actual education. They're just putting the boot down and saying stick to teaching instead of implementing and advancing a specific ideology. If taxes are the tools, so be it.
Harvard is a private instutution. If they want to teach underwater basket weaving, there's not much you can do to stop that. Anymore than Trump can raid apple and tell them to start making Androids. I thought a billionaire businessman would understand that much; imagine if Clinton back in the day tried to seize Trump Towers.
And while we long forgotten: don't forget that all of this is illegal. to retract congressionally appropriated funds that were already budgeted. The time to yoink this stuff legally was a month ago.
LoL - why it makes any sense to do this for universities and not billionaires is beyond me, but I'm sure half the country can explain it to me like I'm 5.
The current admin is openly anti-intellectual.
Edit:
"We need to attack the universities in this country"
"The professors are the enemy"
Specific clip https://www.reddit.com/r/ABoringDystopia/comments/1ichg58/ya...
If you want the full speech it's on YT so if you reply with "context" you should back that up
I'd agree with you that the current admin is anti-intellectual, but this speech is not a smoking gun.
For those who need spoonfed, here is the full speech: https://www.youtube.com/watch?v=0FR65Cifnhw
It's JD Vance's keynote speech at the 2021 National Conservatism conference. The speech, which I've just skimread, is mostly well-worn US conservative complaints about US higher education. He also talks about red-pilling because he's down with the kids, and he adds Jesus sprinkles in case you forgot he's Christian.
The speech is dull but it's bookended with two spicy statements, both of which you mostly quoted. The latter statement is not his words but a quote from Nixon.
Opening statement: «So much of what we want to accomplish, so much of what we want to do in this movement in this country, I think are fundamentally dependent on going through a set of very hostile institutions - specifically the universities which control the knowledge in our society, which control what we call truth and what we call falsity, that provides research that gives credibility to some of the most ridiculous ideas that exist in our country and so I'm excited to close this conference with this particular set of remarks, because I think if any of us want to do the things that we want to do for our country, and for the people who live in it, we have to honestly and aggressively attack the universities in this country.»
Closing statement: «I really want to end this on an inspirational note [...] and the person whose quote I ultimately had to land on was the great prophet and statesman Richard Milhous Nixon [...] there is a season for everything in this country and I think in this movement of National Conservatism, what we need more than inspiration is we need wisdom, and there is a wisdom in what Richard Nixon said approximately 40-50 years ago. He said, and I quote: "the professors are the enemy".»
EDIT: And for the context of the Nixon quote, it comes from a private conversation Nixon had with Henry Kissinger in the Oval Office on December 14, 1972, recordings of which were released in 2008: «Henry remember... we're gonna be around and outlive our enemies. And also, never forget, the press is the enemy. The press is the enemy. The press is the enemy. The establishment is the enemy. The professors are the enemy. The professors are the enemy. Write that on a blackboard 100 times and never forget it.». It's worth noting that Nixon was already keeping an "enemies list": https://en.wikipedia.org/wiki/Nixon%27s_Enemies_List
It doesn't matter what Nixon's context was Vance was quoting him literally by proclaiming it a piece of wisdom.
Posting the entire speech only bolsters my view. For example
"[To accomplish goals].. I think are fundamentally dependent on going through a set of very hostile institutions - specifically the universities..."
I'm confused about your argument. I don't consider it a smoking gun just a concise example of what Vance and MAGA Republicans belive. There's no context confusion, it's on video, and it being dull only shows how comfortable he is exposing insane views.
The spicy soundbites on their own are scary and do suggest the state wants to destroy intellectuals.
The speech they're from doesn't.
The speech defends and praises universities and their role in society. Vance even claims some academics prefer to ignore evidence that refutes their positions, and he's against that; that would be a valid pro-intellectual position if true (but it's completely nebulous and unsourced)
The thesis of his speech was he doesn't like the content of what academics profess and he thinks they ought to teach his political views (and his audience's political views) instead. That's not anti-intellectualism, i.e. "don't trust those book-learning types, look to the common man for answers". This guy still wants ivory towers provided his cronies are in them.
Also it's interesting to see where his quote came from. He clearly picked an on-theme Nixon quote just to appeal to his audience, and he seems to miss the context of the Nixon quote in that Nixon is a paranoid nutter saying it, not coming from a rational place like Vance thought he just did.
>The speech defends and praises universities and their role in society
Which part ?
Current universities are openly anti intellectual.
What evidence do you have of this?
What evidence does the parent comment provide?
I’m not half the country, but I can explain it to you. Billionaires already pay tax on investment income. Universities are exempt but now the proposal is that they pay as well, just like individuals (including billionaires) and other profit-making groups.
Politics of resentment where elite colleges and universities are unjust scams and billionaires are just the pinnacle of self actualization.
Why do you expect a billionaire to steal from billionaires? a portion of non-essential stealing comes from respct, and of course these billionaires are all a part of the same club.
The other lens is simple as well: big fish don't go after the other big fish. That just ends in two hurt fish and no food. Trump thought he was going after a small fry and underestimated the response. just because Columbia folded doesn't mean all universities will.
lens #3: this clip explains it well: https://www.youtube.com/watch?v=VLbWnJGlyMU
He's a bully but if everyone realizes they outnumber (and outmatch him) he loses his power).
Doesn't this tax only apply to "net investment income"/realized gains? Billionaires technically already have to pay it at a higher rate. And well they generally do? I mean when they personally actually sell stock and or receive dividends and interest.
Most of the wealth being in stock is really tricky. You can't really tax stock ownership, but at the same time stock can be leveraged against business deals (Musk for example bought Twitter with largely stock, without having to sell it first and therefore being subject to tax), and you can take out loans with stock as collateral.
It's not that tricky. All you have to do is make it a taxable event to collateralize stock.
Should we similarly tax collateralizing real estate as in home equity loans?
Sure, if you exclude primary residence. We aren't trying to fuck with the middle class, just the uberwealthy. I'd be fine with only taxing collateralized stock on people with over $20M in net worth too. We just don't need to provide tax breaks to the rich to make them more rich.
Now, rigorously define "net worth".
It's such an odd argument - the wealthy always seem to know what their net worth is. We could just make them declare it. If they lie, straight to jail.
Do they? I think exactly the opposite is true - if you ask any sufficiently wealthy person, they’d need a team of people working for a bit to arrive at a very hazy net worth number. Private stock is extremely illiquid and doesn’t usually have a good mark to market, ditto most artwork. My impression is that even most public stock doesn’t generally have the depth of liquidity to absorb a founder selling any significant fraction in a short timeframe without cratering in value.
> If they lie, straight to jail.
How do we know whether they lie without a solid definition of net worth?
I'm not defending billionaires and I believe they should be heavily taxed, and huge inheritances should be outlawed, but what's Elon Musk's net worth, for example? He surely doesn't have $369 billion in cash. Can we tax him based on his Tesla shares? What happens if Tesla stock goes down by 99% next year? It's tricky.
> How do we know whether they lie without a solid definition of net worth?
They get to tell us what they are worth. Generally speaking, if you want to lie about your net worth you are choosing between tax fraud and insurance fraud. There are some areas that are tricky, like pre-market startups, but we have things like 409A valuations that help with that. Penalties should have no statute of limitations - if you lie about it, you get to look over your shoulder forever. It's not perfect, but as you have clearly recognized, there is no perfect system that allows for a reasonable degree of freedom.
> Can we tax him based on his Tesla shares? What happens if Tesla stock goes down by 99% next year?
Not really tricky! He gets taxed on the value of his shares in year 1 and he gets taxed on the value of the shares in year 2. If the value goes down 99%, you pay way less tax (or none if he's no longer wealthy enough to qualify). He can sell his shares to pay it, and I honestly do not care if he is not liquid enough to do that - that's a situation he put himself into. No he doesn't get a tax break on the loss - the rich have a sense of entitlement that their wealth belongs to them free of charge, and I think they should have to pay maintenance. Without public utilities (roads, electricity, air and sea traffic control, etc) and social stability, most of these billionaires would lose their wealth to warlords very quickly.
> He gets taxed on the value of his shares in year 1 and he gets taxed on the value of the shares in year 2.
That doesn't make any sense. If I have $8B worth of shares and I have $2B in cash, and if the wealth tax is 20% I will have to pay all my cash this year. If my shares goes down to zero next year I'm broke. I couldn't just sell $2B worth of shares in the first year either because that would have affected the value of the shares. This is not how taxes should work.
Everyone agrees on income tax or capital gains tax because they are both cash, and the tax is also in the same currency. If we can find a way to tax wealth in the same "currency" (for example 20% of your share portfolio, plus 20% of your cash) then it might work. Obviously the state may not always be able to use shares to fund infrastructure, and cashing out those shares would diminish the value. Also it's still hard to do that for, say, real estate investments.
What doesn't make sense? He'd owe $1.6B the first year, and then he'd be shit out of luck because he drove the stock to 0. Not my problem. And you should stop putting yourself in his shoes - you will never be a billionaire, and you probably won't be a mega-millionaire either. Start worrying about your own situation.
In any case, the whole thread about "net worth" is really besides my original point, which is that collateralizing stock for loans should be a taxable event. The only reason we got into net worth was because I said I'd only apply it to high net worth individuals, since they have almost exclusively benefitted from the economy over the last 10-20 years. This is also super achievable because to get the bank to loan you money, you have to declare the value of the assets and the bank has to agree with the valuation - super easy to determine tax on that number.
I don't feel that strongly about it if he is just sitting on the assets, but if he's leveraging them to buy Twitter, OpenAI or to donate money toward overthrowing the Democratic order, then yes, he should absolutely pay taxes for the privilege.
I'm not worrying about billionaires. I'm discussing about hypothetical ways we can tax them. They own the government, and obviously your idea of potentially making them homeless will be immediately rejected and we will be in this status quo forever.
> collateralizing stock for loans should be a taxable event
I fully agree with this.
> They own the government, and obviously your idea of potentially making them homeless will be immediately rejected and we will be in this status quo forever.
Disagree. We've been negotiating from the middle. We got the New Deal because the alternative for the wealthy was facing a socialist revolution.
I'm all for threatining them with a socialist revolution if possible. However, I'm afraid they are better prepared this time. In today's world a (metaphorical) guerilla war that targets one small win at a time might be more prudent. The wealthy is not necessarily smart. Not all will see it coming.
> Generally speaking, if you want to lie about your net worth you are choosing between tax fraud and insurance fraud.
Funnily enough there is (was?) legal activity about exactly this with our current POTUS.
Real estate assets when being accounted for tax purposes: "Worth: $x"
Same real estate assets when being accounted for loan collateral: "Worth: $10x".
But of course like most legal activity against POTUS, it's just been "abandoned".
When the amount of equity pulled out from the loan exceeds the cost basis, why not?
How? That makes little sense to me from an implementation standpoint.
When I bought my home I had to sell $XXX,XXX of stock to make the down payment. If Jeff Bezos wants to buy the same house, he would use a line of credit from the bank, collateralized by his Amazon shares (or whatever source of wealth) and pay with that. I paid 15% in long-term capital gains, he pays 0%. Under my plan, he would pay 15% LTCG for collateralizing his stock,. If I had to pay it, then it's entirely fair and reasonable that we expect him to pay his fair share too.
You could have done the same thing with a margin-enabled brokerage account, e.g. Interactive Brokers or Fidelity.
It's not particularly hard. Just have enough collateral to not get margin called. And, like the margin interest rate better than the tax hit. Shop around for rates. Notice, you don't have to pay the entire down payment this way.
If you have amassed 6 figures of stock and are buying a house, you're qualified to educate yourself on these topics. It's usually worth reading up anytime you incur that sizable a taxable event.
I am not saying this is a great idea, BTW. Just, it's an idea within many people's reach.
If it's a bad idea, it's a bad faith argument - why would you suggest it? The tax laws shouldn't favor the gross accumulation of wealth, nor the starvation of the treasury, so the laws need to change to force the rich to pay their fair share.
> If it's a bad idea, it's a bad faith argument
I believe the GP is just cautioning rando HN readers that they should not rush out and make their down payment in the manner described, as opposed to liquidating some of their stock options for "real cash" like the GGP had to do.
They are just explaining a reasonable method that the (above) average HN reader could use to be in the same situation as Bezos of having a 0% tax on their down payment.
In the US, there's a pretty massive exemption (well, deferral) for capital gains tax on the sale of a primary residence, so once you have one home to work with, the down payment is (kind of?) tax-free anyway.
They definitely shouldn't. It's absurd to suggest that because a middle-class homebuyer can get a margin loan through iBroker means that we should let the richest people in history dodge taxes in this way. If no one would actually do that, then it really doesn't matter that they technically can. The obvious solution is to take away the privilege from the wealthy and make them abide the same rules as the rest of us.
> They definitely shouldn't.
Never give absolute financial advice to anyone who's situation you don't fully understand.
Nah, I’m pretty comfortable that 99.99999% of people should not take a margin loan to buy a house. Close enough for me.
A fair number of people do use margin for down payments until they can sell assets to cover the margin.
It's not uncommon when people buy deals while traveling or in hot markets.
See also Mr Money Mustache's articles on this topic. He assuredly is not Bezosesque.
Here's the Mr. Money Mustache article I referenced: https://www.mrmoneymustache.com/2021/01/29/margin-loan-ibkr-...
Another very rational reason for such a margin loan for a home down payment is if the stock you wanted to sell hadn't been held for a year and therefore its sale would not yet qualify for long-term capital gains rates.
You might choose to pay margin interest for up to a year so that the stock sales become taxed at the much lower long-term capital gains rates instead of like income.
That might make sense for someone in the 24% federal bracket which ends at just under $200K of annual income, depending upon how much longer one needs to hold the position to achieve the more favorable taxation. Certainly far below the yacht-owning bracket.
Bezos gets a much better margin rate than you or I would ever get on IBKR. And IBKR doesn't margin call, they straight up auto liquidate. Bezos's lender would never do that to him.
And withdrawals from margin accounts should cause taxable events too. Honestly it is up to the industry to justify and propose a workable tax scheme that makes margin accounts feasible. Withdrawals triggering taxable events seems fair to me, though.
If I get something of worth, non-related to the stock/ownership, for the current value on my stock/ownership, I should pay taxes on that amount. I am using the stocks value to gain something. If I take out a loan for businesses needs, that is in the interest of the thing I own. If I take out a loan to buy a separate thing, I have leveraged the current value and have therefor realized the current value and should pay accordingly.
Lenders would have to report loan origination for secured loans where some specific asset classes are acting as the collateral.
Why does it matter? It eventually gets taxed through estate tax and at a higher rate than income. This obsession with taxing them _now_ only makes sense if the point is to punish the the rich.
Agreed. For the revenue tax activists want from billionaires, it would necessitate a wealth tax, which I believe is unconstitutional. The non-profit tax exemption fight is about "income taxes" which billionaires already have to pay (but avoid). So it is an apples-to-oranges comparison.
> it would necessitate a wealth tax, which I believe is unconstitutional
I take it you haven't heard of property taxes.
I'm not a lawyer but I do not consider a property tax to be the same thing as a wealth tax.
If I own a house or condominium in San Francisco, at a fundamental level I do not own the land or space the residence is sitting on. "Ownership" is basically a lease of the parcel from the city. The house structure is an improvement on leased land; this ties the property tax calculation to the value of the structure. The property tax is the rent on the land/space. I believe this is the constitutional justification for property taxes (no opposition from me).
> If I own a house or condominium in San Francisco, at a fundamental level I do not own the land or space the residence is sitting on. "Ownership" is basically a lease of the parcel from the city.
It's interesting to me that medieval European peasants "renting" the land they farmed had much stronger ownership rights than Americans who "own" land do today.
> I believe this is the constitutional justification for property taxes
It isn't. The constitutional justification for property taxes is that they're assessed by the states, not by the federal government.
The federal government is free to assess property taxes too, except that it must apportion them between the states: https://constitution.congress.gov/browse/essay/artI-S9-C4-1/...
> An 1861 federal tax on real property illustrates how the rule of apportionment operates. Congress enacted a direct tax of $20 million. After apportioning the direct tax among the states, territories, and the District of Columbia, the State of New York was liable for the largest portion of the tax [...]
What this meant was that the federal government delegated tax quotas to the states and the states were responsible for collecting them as they saw fit.
Recommend James C. Scott's "Seeing like a State" to learn more about the evolution of property valuation and rights. The systems of land rights in up to the 1500s-1800s were quite complex. The modern state imposed a uniform system of free-hold tenure which shifted the complexity to the downstream consequences.
https://www.amazon.com/Seeing-like-State-Certain-Condition/d...
I was making a comment about radical change in the meaning of "renting" and "ownership". Did you have anything specific in mind?
(I've read the book; it didn't strike me as related to this topic.)
The concept of freehold tenure is pretty central to the book. Not sure you could get any more on-point for the general reader looking for a book recommendation.
But since you ask: the peasant's rights to land were exquisitely bespoke. No tax collector could figure out how much one family owed versus another in another county. The rules in one prefecture of one county may have been completely unresolvable with the rules of a county a hundred miles north. Everything was negotiated family to family over generations, with rights in one place having no corollary whatsoever with the rights in another area, making the tax man's duty a fool's errand.
So, I don't your first statement "European peasants "renting" the land they farmed had much stronger ownership rights than Americans who "own" land do today." is really meaningful. Because no generalization can be made about the rights of a European peasant. That problem is the whole reason for the systems of freehold tenure that prevail today: making the territory "seeable" by the state.
You're talking about something entirely different. The typical case for the renting medieval peasant is that the rent on a given plot of land is set by custom, the nominal amount has been the same for centuries, and it can never be changed for any reason. No administrative task could ever be simpler than collecting the rent.
Landowners responded to that by adjusting the size of the units in which land rents were due, which is why a major demand of peasant movements was for standardized units.
The fact that rents were absolutely nonnegotiable led to other developments, such as the lord being so indifferent as to exactly who was renting from him that the renter was free to leave his status to whoever he chose in his will.
> amount has been the same for centuries, and it can never be changed for any reason
That's only true in a narrow and a relatively obtuse way. For starters that varied to a huge degree between regions and types of contracts.
e.g. in England freeholds were indeterminate and or more or less worked the way you are saying.
However most peasants didn't have those, before the plague the overwhelming majority of peasants were villeins (i.e. serfs), inheritance was customary and lords were not legally obliged to pass it to the serf's descendants (also there were all kinds of fees, fines and stuff besides the fact that they weren't legally free and there was no legal system to protect your rights).
Leaseholds and copyholds became much more common due to labour shortages after the plague. leaseholds were not inherited and market price based. Copyholds were inherited and rents customary fixes (but again lords could and would impose all kinds of arbitrary fees to get their cut).
Then you had the enclosures starting the 1400s (a lot of the land peasants relied on was common)
Again, you're generalizing. To say that doesn't work in medieval Europe is probably itself a generalization. But if you read the book, I don't think this would be a point you'd be arguing.
The Supreme Court explicitly allowed property taxes in Pollock decision. They haven’t for wealth taxes (they still might allow it but they also might not).
what is unconstitutional about a wealth tax?
>> what is unconstitutional about a wealth tax?
Article I, Section 9, Clause 4:
"No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken"
A wealth tax is generally considered to be a direct tax. If you wanted to enact one at the federal level, my understanding is that it would have to be done in proportion to the census. So, given that Mississippi is around 1% of the total US population, Mississippi would have to pay 1% of the wealth tax. Mississippi is the poorest US state, so that would be a very regressive tax.
An income tax is also considered to be a direct tax, that's why it took an amendment to the Constitution to enact one.
The Constitution applies to taxes at the federal level, not state. States could enact a wealth tax the same way they enact property taxes now (depending on their state Constitutions). The problem for them is that wealth is a bit more mobile than property.
And yes there are arguments about what a direct tax really meant in the language at the time the Constitution was written, there are arguments that the income tax should have been legal without an amendment. But that's not how it went down.
It’s not totally clear if it would be but here’s a summary: https://city-countyobserver.com/the-constitutionality-of-a-w...
I'm not a lawyer but my reasoning is this:
- as far as I know, double taxation by any given entity (Federal Gov) is unconstitutional
- a given dollar is taxed once as income. A federal wealth tax on the remainder of that dollar would be double taxation.
That does not prohibit the Federal Gov from taxing once, and your residential state from taxing you a second time.
There are other arguments about "direct taxation" I don't fully understand.
"Double taxation" is absolutely constitutional. Tons of things are double, triple, quadruple and more taxed.
I make a W2 salary. I pay federal income taxes on it. I pay FICA taxes on it. My employer pays payroll taxes on it. I might pay state income taxes on it. One event, tons of taxes. I take that quadruple taxed money and buy a dinner with a beer. Sales taxes on the overall sale, additional taxes on the alcohol, additional sales tax riders because I bought it in the touristy night life area. Triple taxes on my quadruple taxes, good lord! Unconstitutional!
Worthless phrase, "double taxation".
> That does not prohibit the Federal Gov from taxing once, and your residential state from taxing you a second time.
Once again, the several different taxes applied to my salary income. Then on that I go buy a gallon of gasoline, uh oh, federal gas taxes on that. Or I buy a plane ticket and that gets Federal Excise Tax (7.5% of the base fare), the Federal Segment Fee (currently $5.20 per segment), the TSA Security Fee ($5.60 per passenger), and more. Oof, "double taxation"! Even at the federal level!
Billionaires do pay income tax on investment income.
If they sell and incur capital gains. But they have so many better alternatives than you or me. And if they do incur capital gains they pay the same tax rate (or maybe 5 basis points higher, depending on your income) as you or me.
What alternatives are those, that enable realizing income without incurring income tax?
Borrowing against assets. Wealthy people get low, low rates, much lower than the hoi polloi would get on a HELOC or brokerage account margin loan. Banks like having them as clients.
Not only they get low rates, but if they have friends in the palace, they tend to be beneficiaries of large governmental contracts; during times of economic upset, they are the beneficiaries of large “monetary injections” that later cause inflation and prices to rise for all of us. During 2008, COVID, and the Mango recession the wealthy got much much wealthier, and all we got was expensive eggs and higher costs of living.
And how do you pay back the loan without realising a gain?
You don't pay back the loan. You die, your assets pass to your heirs, and their cost basis is stepped up. The heirs sell some of the assets to pay the loan back. They don't have capital gains because of the stepped-up cost basis.
That's the gist I got from reading https://www.reddit.com/r/BuyBorrowDieExplained/comments/1f26...
There are finer points I don't understand such as:
1. Is the stepped-up cost basis available to the estate or only to the heirs? If it's to the estate, it's easier for the bank to trust they'll be paid back.
2. If the heir gets the stepped up cost basis, what legal guarantees does the bank have that the heir will pay the loan back?
And probably a lot else. I assume there's expensive lawyering and accounting involved in setting it up, so it isn't cost-effective unless you have a certain amount to shield from taxes in the first place.
Really? They're not going to get below prime. Nobody loans out money with a guaranteed prospect of below market returns. It's going to be above prime.
Usually about the lowest rate you can get is a mortgage on your house.
Of course, if your credit is bad, you're not going to get a good rate.
First of all, prime can be pretty good vs being taxed. Secondly, who knows what kind of sweetheart deal can be pulled for a small (in the big scheme of things) "loan" when banking of billions is at stake.
> Nobody loans out money with a guaranteed prospect of below market returns
Not to you or me. Giving powerful people who can send more business the bank's way a freebie on their personal accounts might make sense as a loss leader.
An ELOC for a HNWI can be significantly lower interest than a mortgage. They can often get "fed funds rate/LIBOR + 0.5%" or so. This is because they can accept a floating rate, while mortgage rates get locked in for 10-30 years.
Adam Neumann and several others in that era famously got very large zero interest personal loans because the bank wanted their corporate business.
Only short term gains are taxed as income. Long term capital gains tax caps at 20%, wildly lower than the top income tax bracket of 37%. And it's always possible to defer short term gains (e.g. put your trading money in an IRA).
IRA contributions are drastically limited to a $7000 cap per year under 50. Whether they should be is another question, and one worth exploring.
Long-term investment is rightly seen as something to be encouraged hence the lower tax rates. You can make the argument that the rate should be more like 0% since the money invested and risked was already taxed most likely...20% is a reasonable value for the market regulating infrastructure provided by gov't entities.
IRA caps are low, but loads of people earning enough that they'd reasonably save more than 7k annually have access to 401ks or similar accounts that raise the annual cap to >30k, vastly more than the typical person is saving.
The middle class isn't taking advantage of low capital gains rates to earn more from their taxable brokerage accounts because they haven't even filled up their tax-advantaged accounts.
There are loopholes to roll all sorts of nonsense into an IRA though. There was a whole news cycle in the 2012 election about Mitt Romney's $4M "IRA" or somesuch. And IRAs are hardly the only shelter from income tax, they're just the most obvious.
The simple truth is that wealth beyond the ~$10M level in the US pays essentially zero "income tax". It just doesn't happen, no one does it. Short term gains are only taxed for small investors who don't know any better.
According to Google:
"Entrepreneur Elon Musk announced on social networks that this year he will pay 11 billion dollars, thus becoming the largest taxpayer in the history of the USA."
Certainly someone we can take at his word, which is why my self driving Roadster flies me to work every day
That was on a sale of Tesla stock that he'd held for much longer than the long term rate threshold. He paid 20% on it, or plausibly less. I, personally pay a higher rate than that. Big numbers notwithstanding, Elon Musk shouldn't be paying less tax than I do, sorry.
If you hold stock long term, you will pay the same or less tax.
From Google: "For the 2025 tax year, individual filers won't pay any capital gains tax if their total taxable income is $48,350 or less"
If you've got a smart phone and a credit card, you can buy stock. See robinhood.com
You're dodging, and I know you're smart enough to know how this goes. I don't make money with long term stock, I make salary. I pay >>20% tax on that salary. Billionaries make, statistically, zero salary. All their income is on long term gains. All of it. So billionaires pay 20%, and that only if they're dumb enough not to find other shelters.
You're just saying "Well, that's the way the tax code works". I'm saying "The tax code sucks", and your point is non-responsive.
You can invest in stocks, too. Over time, it will pay more than your salary.
If you bought a house, and it goes up in value, that increase will be a capital gain taxed at capital gains rates.
So how "over time" do I need to wait until I start paying the same tax rate as a billionaire? Seems like your solution to "the rich pay less tax" is "well, everyone should just be rich then"?
"Let them eat cake" makes for extremely poor federal revenue policy.
Not at rates anywhere near tax rates on wages of a middle class worker.
Because investment income is not the same as wage income. Nor should they be.
Why not? Money is fungible. A dollar is a dollar. Why should investment dollars be taxed less than those earned through the sweat of one's brow?
Mainly to encourage people to save their money. You know, "work smarter, not harder"...
Financial policy is very specifically against people saving their money though - that's why a certain level of inflation is considered desirable to mainstream economists. Spending and borrowing is heavily encouraged at all levels, while investment opportunities are gated based on wealth and income to prevent the poor from being able to "work smarter".
> investment opportunities are gated based on wealth and income
Anyone can install robinhood on their phone and trade using their credit card.
> Financial policy is very specifically against people saving their money
No, it isn't. People who save money are terrified of risk. There's nothing stopping anyone from investing the money.
> that's why a certain level of inflation is considered desirable to mainstream economists
That's the excuse the government makes to inflate the money. You'll never see a politician point out the real reason for inflation. It's so they can spend it without raising taxes, but it does cause inflation, and inflation has to be blamed on something else. Anything but the truth.
> Anyone can install robinhood on their phone and trade using their credit card.
Buying a few stocks on an app is not anywhere near the same thing as being an accredited investor. Access to the most lucrative investment opportunities are not available to the average person, and that's almost entirely due to rules intentionally created to block anyone but the already wealthy.
The methods that institutional investors have, like market making or delta one strategies, aren't available because of the rules, it's because individual investors literally don't have the scale, flow and networks to do it.
Second of all, at the end of the day it's other people money's they're using, and are entrusted to manage. You can't demand people to just lend money to anyone, any sort of free market of loans will quickly coalesce into a few capital allocators.
Please, this thread is about the average wage-grade worker (money earned via the "sweat of one's brow"), not an "accredited investor". In this example, almost anyone in the US can open up a Robin Hood, Vanguard, Schwab, Fidelity, etc account with probably $25. You don't need access to the most lucrative investment opportunities to make money; simply buy a standard S&P 500 ETF and call it a day. Over time, the chances of you making money with your investments are high, and the tax burden is lower, meaning you get to make and keep more money in your pocket. That is a win for everyone - not just the magical "billionaire".
The average worker in the US needs these sorts of opportunities to be self reliant. You don't need to be a billionaire to make money on the market, you just need a few dollars, some time, and the will to take a little risk. Stop hating on the average worker...
To say nothing of insider trading for those connected to folks setting policies that affect the economy
Right, because the average worker has insider connections that set policies that affect the economy. /s
Sorry, nothing prevents the poor from working smarter. Just because you are poor does not mean you are uneducated. And, investment opportunities are NOT gated based on wealth and income. Literally anyone in the US can open an investment account and get started. The lack of desire is the real issue.
> And, investment opportunities are NOT gated based on wealth and income.
What? There is literally a class of people considered accredited or sophisticated investors.
To be considered an accredited investor by the SEC you must have a net worth of over $1M -not including- your primary residence, and you must have an annual household income of over $300K.
It is quite literally a wealth and income gate.
We have tax-advantaged retirement accounts to enable the middle class to save a reasonable amount in order to retire without being a burden on society. A typical saver doesn't have additional extra money leftover for a taxable brokerage account that exposes them to capital gains taxes.
Low capital gains taxes aren't meaningfully encouraging somebody making 75k and saving 10k annually to continue with their saving plan.
So you tax the person extra who needs to eat their money, and let the person who is swimming in money keep more of it?
And you earnestly can't understand why the poor want to increase taxes on the rich?
Short term dividend income is taxed at the same rates as wage income.
When i needed money for a house, without a good security i had to pay 1.6 and with 0.8.
Rich get richer, poor never see this advantage.
Billionaires do not get a tax exemption
No but their earnings are mainly in their companies, and those can hire fleets of tax attorneys and accountants to crush their tax burden.
Once the money is in stocks, it doesn't get taxed unless you draw on it, but the billionaires can use strategies like buy, borrow, die (which last I checked only really works if you're north of ~ $300M) to avoid personal taxes.
Billionaires benefit most from the largest tax exceptions. No tricky accounting needed it’s baked blatantly into the tax code. Long term capital gains are specifically lower than short term capital gains. Further gains are only taxed on sale allowing a lifetime of growth to pass to the next generation tax free.
They also operate at a scale where many tax breaks become viable. CEO owners aren’t paying themselves nominal salaries because they are actually working for free. Creating a shell company to own your 50k car isn’t useful but it’s damn well worth it if you’re buying a 50+m dollar yacht for personal use. Turning depreciation into a nominal loss offsetting capital gains etc.
Meanwhile people of lesser means get stuck with all kinds of crap like a 10% early withdrawal penalty on 401k plans.
>> College endowments are typically tax-exempt, but a 2017 law imposed a 1.4% tax on investment income for a small group of wealthy private universities.
> LoL - why it makes any sense to do this for universities and not billionaires is beyond me, but I'm sure half the country can explain it to me like I'm 5.
Because they already do it for billionaires: unlike university endowments, billionaire investment income is not tax-exempt by default, it's already subject to income tax [1].
[1] At least theoretically, ignoring the loopholes and tax-dodges billionaires can take advantage of with literal armies of accountants.
Billionaires pay 37% or 20% on their investment gains, can't really explain it to a 5 year old because congress and the IRS make it complex.
They don't pay anywhere close to that, there are tons of tricks to avoid paying that % on gains and the more money you have the more leeway for loopholes.
Very relevant in startup ecosystem as well (look up exchange funds, opportunity zones etc.)
40% of Federal income tax revenue comes from the top 1%.
Imagine how much federal revenue would increase if that 1% paid the same effective rate as say a typical plumber, rather than the <10% they currently pay. That might actually put a dent in the trillions of dollars this congress is about to add to the national debt.
shrug
I hear that sentiment a lot, but it doesn't seem right to me. My salary is pretty close to the median plumber's income, and my family's effective tax rate last year came in at... 1.6%. And that's with all retirement account contributions going toward Roth accounts. If we'd chosen to contribute to traditional IRA/401k accounts instead, the EITC and child tax credit would easily turn our tax bill negative.
A quick search tells me the median plumber salary is ~$60k. Your telling me your entire tax burden is ~1k? I find that hard to believe, and if true is pretty darn atypical. That's closer to what I was paying when I was making ~10/hr.
Yes. We had $50k of taxable W2 income ($63k including pre-tax insurance premiums and HSA contributions), $13k of taxable family leave benefits, $4k of interest/dividends (mostly qualified dividends, taxed at 0%), and $9k of long-term capital gains (taxed at 0%), making our pre-tax gross income about $89k. Only $66k of that is subject to taxes; the standard deduction brings that down to $37k, on which the tax is $4k. With a $2,000 child tax credit, $400 saver's credit, and $200 foreign tax credit, our tax liability is reduced to $1400, which is 1.6% of $89k.
"That might actually put a dent in the trillions of dollars this congress is about to add to the national debt."
It might also result in even more spending. I don't think that there is any "natural ceiling" when it comes to willingness of politicians to spend other people's money. The only ceiling is external - how much will the system bear.
> rather than the <10% they currently pay
I suspect you're using a different definition of "income" than the IRS. What is it?
The amount they report on their tax returns.
https://www.pewresearch.org/short-reads/2023/04/18/who-pays-...
For one thing, many plumbers do make it to the 1%: Trades are a profitable line of work for the industrious.
But the median 1%’er is paying 3-4X the effective rate of the overall median earner.
So if they're earning 50x as much, why are they only paying 3-4x the tax?
>> is paying 3-4X the effective rate > why are they only paying 3-4x the tax?
You have conflated the tax rate with the tax amount.
What percent of all income do they make?
Edit: it's an honest question. Maybe the top 1% paying 40% of all income taxes is too much tax. Maybe it's not enough. Without knowing how much of all the income they make it's a meaningless number.
According to the Tax Foundation[1], for tax year 2021, the top 1% of U.S. earners—those with an adjusted gross income (AGI) of $682,577 or more—accounted for 26.3% of total AGI and paid 45.8% of all federal income taxes.
My personal opinion is that income tax should be more progressive, but I know that plenty of smart people disagree on that.
[1] https://taxfoundation.org/data/all/federal/latest-federal-in...
Your source leans right-center, so probably good reason to suspect their reported top 1% AGI is low and their reported federal income tax estimate is high.
It’s IRS data. You can download it from the IRS website and replicate the analysis and prove them wrong if you’d like.
1. Does not follow. Just because you don't like someone's politics doesn't mean they're dishonest.
2. Your own link contradicts you. It says explicitly that that site hasn't failed any of their fact checks and doesn't use loaded words that they say are typical of that category. It says the categorization is because the site promotes libertarian policies.
There are a lot more taxes than the federal income tax. It happens to be one of the most progressive taxes. Anyone focusing on that and ignoring all the others is trying to scam you.
This is true for ultra high net worth individuals. They can do schemes like borrowing against equities and using the tax-free cash for expenses or purchasing other assets.
It is also true for many “normal” one percenters. For example there is a service for incorporated anesthesiologists where you tell them where you plan to go on vacation and what dates, and they create a bullshit anesthesiology conference, including the brochure and other artifacts, that meet the letter of the law IRS definitions for a valid business expense. None of this stuff ever hits AGI.
A simpler example: social security taxes hit a cap at a bit under $200,000/year. Somebody working fast food at minimum wage is paying 6.2% on every dollar they earn, while with my fancy tech job I’m paying a substantially lower percentage.
The social security "tax" should really be conceptualized as an investment, not a tax. The typical fast food worker has probably not passed the first bend point in the Social Security PIA formula, meaning that social security is giving them 90 cents on the dollar*. You, with your fancy tech job, are likely well past the second bend point: social security is only giving you 15 cents on the dollar* (and nothing, obviously, for earnings beyond the payroll tax ceiling).
It's a progressive system overall - but it wasn't designed for the purpose of wealth redistribution, hence the payroll tax ceiling.
* More precisely, their monthly benefit at full retirement age increases by 90 cents for each additional dollar of pre-retirement average monthly earnings, whereas yours only increases by 15 cents.
That's wild. I searched, though, and this is the closest I found: https://www.cerebraltaxadvisors.com/blog/vacation-business-t.... Is there a link you could share for the actual fake conference approach?
> This is true for ultra high net worth individuals.
Anyone can borrow money against their stocks, house, or credit card. It's tax-free as well.
> They can do schemes like borrowing against equities and using the tax-free cash for expenses or purchasing other assets.
Um, borrowing money is not "income". You have to pay it back, with interest.
If the asset appreciates faster than the interest rate there's never a need to sell. If the interest rate is lower than the capital gains tax rate, paying the interest is cheaper than paying taxes.
UHNW individuals can borrow until they die. Their assets pass to their heirs with a stepped up cost basis. The heirs can liquidate whatever's needed to pay off the loan and incur no tax.
Normal people can't do this. If I die owing money, my creditors will take it out of my estate before it passes to my heirs. UHNW estates can be structured differently and creditors can accommodate different payment terms (get paid second) because they know the money's there, and it saves taxes.
You can also read: https://www.reddit.com/r/BuyBorrowDieExplained/comments/1f26...
I might have gotten some things wrong. Or maybe the poster has.
> Their assets pass to their heirs with a stepped up cost basis
LOL, the stepped up basis gets hit with the inheritance tax.
> The heirs can liquidate whatever's needed to pay off the loan and incur no tax.
The loan and the interest payments and dont forget the inheritance tax.
> Normal people can't do this.
Yes, they can borrow money, die, the inheritors pay off the loan with the stocks, and then pay estate tax.
> LOL,
I assumed you asked a question to learn something. If you're not interested in learning, please continue believing that everyone gets the same tax system. Otherwise keep reading.
> the stepped up basis gets hit with the inheritance tax.
There's no federal inheritance tax. Only some states have it. You're thinking of the estate tax.
If you read the link I posted: https://www.reddit.com/r/BuyBorrowDieExplained/comments/1f26...
it has a fairly detailed explanation of how it's a completely different ballgame above a net worth of $300m. Grantor trusts allow sidestepping estate tax and...
> The loan and the interest payments
"The loan" otherwise known as "income" because that's what it really was. Income that would normally have been derived by selling assets. Obviously it has to be paid back. No one said it's free money. Only that it's (largely) tax-free money.
The interest payments are lower than the income tax would've been on the same amount of income.
> and dont forget the inheritance tax.
You mean estate tax. Explained above.
> Yes, they can borrow money, die, the inheritors pay off the loan with the stocks, and then pay estate tax.
Not in the same way, and not nearly as effectively.
If there are specific inaccuracies with https://www.reddit.com/r/BuyBorrowDieExplained/comments/1f26... I'm open to learning.
> There's no federal inheritance tax. Only some states have it. You're thinking of the estate tax.
They're the same as far as this discussion is concerned, as the amount that the beneficiary gets is (roughly) the same.
> "The loan" otherwise known as "income" because that's what it really was
Borrowed money is not "income" in any sense of the word. When I was on summer vacation, I decided to take a class in accounting. One of the most productive uses of my time. I recommend it. P.S. if your business tries to classify borrowed money as "income", that's called fraud.
> If you read the link I posted
I rely on my CPA for tax advice, not the internet, nor do I care much for misusing accounting terms. I've read too many articles that confuse income with revenue, wealth with income, and so on.
> They're the same as far as this discussion is concerned, as the amount that the beneficiary gets is (roughly) the same.
The estate's value is reduced by what it owes.
> if your business tries to classify borrowed money as "income"
sigh C'mon man, engage in good faith here. Stop saying things I didn't say.
If you can borrow cash against assets, don't have to pay principle until you die, and only pay low interest payments then it's functionally the same as selling those assets at a low tax rate. That's the principle.
And if you can use trusts to avoid estate taxes then there are no (or very low) taxes due ever.
> I rely on my CPA for tax advice
Ok ask your CPA what they know about using trusts to avoid estate taxes. Maybe it's BS but maybe it's true. Without some curiosity, how will you ever know?
> not the internet
More reputable sources than Reddit indicate it may be possible to use trusts to greatly reduce or eliminate estate tax:
https://privatebank.jpmorgan.com/nam/en/insights/wealth-plan...
https://www.investopedia.com/terms/g/grat.asp
https://www.fidelity.com/learning-center/personal-finance/wh...
I don't think anyone is arguing that a loan is income in a legal sense. I am going to generously assume you misunderstood.
The top 1% of people make 20.7% of the country's income. Given progressive tax rates, they should be paying a lot more than 40% of Federal income tax revenue, but rates don't scale enough, and aren't lax enough on other classes.
Can you explain your reasoning behind "they should be paying a lot more"? I kept hearing that they didn't pay their "fair share" when in fact it appears they pay double. It just seems like whatever they actually pay, measured in dollars or as a percentage, will always be widely regarded as not enough.
There are a couple of key phrases in politics that get used because there is no actual justification. "Fair" is one of them. It is impossible to achieve fairness in the tax system under any circumstances, it is always taking from someone who - from the fact that it isn't voluntary - we can assume quite likely disagrees with how the money is about to be used. Taxes are fundamentally arbitrary.
So in practice, if "fair" is used in politics the appropriate reading is often as a euphemism for "I think we have the numbers to push this interpretation of the world on people; it'll be good for us".
Could you help me understand why an individual with one billion, needs two? At what point would you accept that someone has more money than they'd reasonably need? And if you just thought of a maximum amount, then, wouldn't the acceptable tax rate over that amount, be 100%?
> Could you help me understand why an individual with one billion, needs two?
Not sure any of these companies have really appreciably made the lives of people better. Sure seem to have funnelled more money to Elon though.
No money was "funneled" to Elon. He created it.
As for making lives better, Starlink was provided free to disaster victims in N Carolina and the LA fires. Something the government failed at. Enabled by cheap reusable SpaceX rockets, another thing the government failed at. Starlink is very popular, so it must be making peoples' lives better.
> No money was "funneled" to Elon. He created it.
Money was funnelled to Elon, he has a knack for getting government contracts. My memory is Tesla was powered by many grants for whoever was willing to work on electrification of society. The issue with that is that people want to put more money under the control of the government, despite it being the entity that funnelled money to Elon. I don't really understand that perspective, it seems a bit crazy - it'll end up with Elon getting more and more power and wealth. If we assume de-powering and de-wealthing Elon is a good, why push more money into the system that is wealthing and powering him? One theme in Elon's companies is they are positioned to hoover up money the US government is wasting and make sure it ends up in Elon's pockets.
Less government spending is more likely to hurt Elon than help him.
Government contracts where they buy something is not "funneling" money any more than you "funnel" money to Safeway when you buy tomatoes there. And if Musk had failed to deliver working rockets, NASA wouldn't have paid a dime. Musk bet his entire fortune on it.
Musk also sold those rockets to NASA for 10% of what NASA would otherwise have to pay.
> One theme in Elon's companies is they are positioned to hoover up money the US government is wasting and make sure it ends up in Elon's pockets.
Tell us how that works.
> Less government spending is more likely to hurt Elon than help him.
Are you suggesting that Musk is doing what's right for the country rather than what's right for his fortune?
> No money was "funneled" to Elon. He created it.
No he didn't.
> Starlink is very popular, so it must be making peoples' lives better.
So is meth.
So every enterprise becomes state owned? Ilya Sutkever's new company is already worth 32B so 31/32 of it should be owned by the government in your world? Who makes the decisions for it?
I am alarmed by how quickly Americans leap from the suggestion that we tax the super-wealthy more, to this idea of full communism.
Assume you think the government is in a better position to spend that billion than the billionaire is to figure out what to buy or invest their money in?
I know he's out of favor with a lot of people, but would Elon have created SpaceX or The Boring Co or Neuralink, or helped start OpenAI if he hadn't had the spare billions to do so?
I'd much rather have multi-billionaires investing in the economy, and in the future, than giving additional money to the government.
So you'd rather have someone unelected with that money. Don't y'all live in a democracy?
We live in a Constitutional republic, with a Bill of Rights and the right to own property.
So, no?
Correct. Look up "Constitutional republic".
> when in fact it appears they pay double
They very obviously don't make only twice as much money as the bottom 80%, so how is that equal in the slightest?
You've mis-read the comment. This logic is not strictly related but it might help you understand what he was saying:
There are ~300 million people in the US who are not billionaires. If they earn, on average, $4 each that balances out a billionaire by income [0]. Since there are <1,000 US billionaires, the average american income would need to drop back to something around the $4,000 range for billionaires to be out-earning them.
This is why taxes tend to land heavily on the middle class, the billionaires don't control most of the money. If politicians want access to money, the biggest pot isn't the billionaires.
[0] And billionaires don't generally make billions in income because it is a wealth measure.
The top 1% aren't the billionaires. It's also not most of the millionaires. It's people earning a tiny bit less than 700k a year.
The suggestion is simply that the top 0.1% pay more - as they will be little affected by it.
It's important to distinguish between wealth and income. Like, I would say that a lot of HN readers are in the top decile of income in whatever country they live in, but far, far fewer are in the top decile of wealth.
Personally, I think that we should tax wealth more in general, and probably make the income tax a bit more progressive (I currently pay 52% which sucks, but if I had to pay a few pp more to get rid of homelessness and poverty in my country then I'd be ok with it).
> as they will be little affected by it
Everything you tax away from wealthy people is removed from their investments.
For example, if all of Musk's income above $1m were taxed away, the following companies would never have existed:
1. Tesla
2. SpaceX
3. Starlink
4. Neuralink
Its still less than the fines most of those companies have incurred in the space of a year.
Do you think they were arguing for taxing away all wealth over $1 million?
If they were taxed $1, that's $1 taken away from investments.
Do you think they weren't? What about that logic doesn't apply to millionaires?
Or to put it another way, if I make the same claim about millionaires; how do you expect to argue that they will be greatly affected by being taxed more? A 1% tax increase on someone's gross income is never going to "greatly" affect them unless, but if it happens 100 times they will be pennyless.
If you take money away from someone, they will have less money and do less because they have less resources.
I'm not sure what the disagreement is? None of the stuff you said is wrong, but I don't see how it is a response to my comment. Nor do I see how it is particularly relevant in a conversation where I assume the idea is a different progressive taxation rate.
There isn't a disagreement, it is a question (technically, several questions). The hint is in the "?". Your 1 sentence comment isn't long enough to respond to directly without more information, even if I wanted to.
I am going to abstract from the hard 1 million number which is obviously low in 2025, and just base my arguments on maybe a few million as a reasonable limit. Make it ten or twenty if that fits your mental model better. You have no way of knowing that those companies would never have existed. They could very well have existed, just no billionaire would have been the majority owner. The money is not removed from their investments, but they are required to divest them to other owners. Funding mechanisms for the companies now self-funded by billionaires would be quite different if the ultra-wealthy were never allowed to exist. It would require more cooperation, but it would not therefore be impossible.
If somebody cares about progress and is highly motivated, they should remain highly motivated to create incredible products and services, whether that buys them unchecked power or not. If some people would be less motivated and do less than they do now, it would be a lesser evil that creating oligarchs thirsty to dominate whenever they get the chance. As long as people can live a good and comfortable life, they do not have rights to more than that.
People who argue against progressive taxes tend to ignore the fact that modern capitalism is basically a game, one where the rules greatly favor the richest, who have virtually unlimited leverage compared to the average person. They make money exponentially more easily than others. It is absolutely right to correct this game through appropriate progressive taxes. Every once in a while an adult needs to step in to keep the game fun for everybody, and not just let the best player dominate others and make everybody else miserable. Maybe if we did this, the price gouging and constant turning of the screws would give way to a society where fair trade was the default cultural and economic norm.
Certainly hoarding more wealth than Smaug is a crime of grave injustice against humanity. For the mind completely sold to capitalism, this is impossible to understand. But people come before wealth and power.
> If somebody cares about progress and is highly motivated, they should remain highly motivated to create incredible products and services, whether that buys them unchecked power or not
If you tax their money away, they have that much less capital to invest.
> It is absolutely right to correct this game through appropriate progressive taxes.
Only if you don't like electric cars, cheap space rockets, cheap global communications, and enabling people with spinal injuries to need a lot less help.
> Certainly hoarding more wealth than Smaug is a crime of grave injustice against humanity. For the mind completely sold to capitalism, this is impossible to understand. But people come before wealth and power.
Nobody hoards wealth. They invest it. Nobody has a Smaug hoard. There are no Scrooge McDuck cash vaults.
I suggest you check out what happened under communism in the Soviet Union, China, Cambodia, Cuba, etc., under communism where people came before wealth and power. Your ideas sound good in a textbook and in the classroom, but they just don't work in the real world.
How come the system rewards someone like Musk with so much but doesn't do the same for people like Norman Borlaug (green revolution), Frederick Banting (insulin), Karl Landsteiner (ABO blood groups) or Katalin Karikó (mRNA vaccines)?
What sort of things can our society do to ensure that the people who dedicate their lives to eliminating the suffering of so many are compensated for what I'm sure we can agree are absolutely amazing accomplishments?
> Nobody hoards wealth. They invest it. Nobody has a Smaug hoard. There are no Scrooge McDuck cash vaults.
There are, unfortunately. [0] Though Putin's gold palace did have to be stripped for fungal problems, later.
Musk does go around with a large amount of debt, such as the 13bil he currently owes. So he's less likely to have a prepper vault. That does not mean that human greed doesn't turn to cartoons for inspiration, at times.
Musk's companies are hype stocks. Today's many successful tech companies run because of the commodification of x86 hardware, allowing them to build massive data centers, run cheap ad platforms, provide things like YouTube, etc, for free. All of this was because of Linux, which Linus Torvalds created. Before Linux and commodity x86 made it reliable and useful, every company had to pay Sun/IBM exorbitant amounts. In no conceivable universe has Musk created more value than Linus. Yet, Linus is not a billionaire.
Most businesses are funded by taxpayers, either directly or indirectly. Elon Musk is a billionaire because of DOE funding, or there would have been no Tesla today.
By January 2009, Tesla had raised $187 million and delivered 147 cars. Musk had contributed $70 million of his money to the company.
In June 2009, Tesla was approved to receive $465 million in interest-bearing loans from the United States Department of Energy.
What is the right percentage for the 1% to pay? State a percent.
I keep here this “the rich should pay more”, but rarely do I hear a number.
Whatever it takes to restore 1960s level of inequity.
By whatever measure works, eg old school gini coefficient or something more modern.
You're right though: food fights over decimal points and gaming the rules nicely obfuscates any constructive debate about what kind of society we want.
Your answer begs the question - why is the 1960’s the right target?
And if the Gini coefficient is calculated pre-tax and pre-benefit distribution, it’s not going to change with high taxes and high redistribution (and yes you mentioned it may not be the right measure).
And if the Gini coefficient is calculated based on income data from the US, do we know if the better Gini from 1960’s wasn’t just due to income not being reported to the IRS?
> why is the 1960’s the right target?
Realpolitik. Proper Nordic levels of (lesser) inequity is not likely in the USA. But selling the nostalgia of our '60s era prosperity might fly.
> if the Gini coefficient is calculated pre-tax
Firstly, then pick a different different metric. Gini coefficient is merely the most familiar.
Secondly, you asked about proper income tax rate. In my pithy reply, I implied outcomes are more important than implementation details, but slap fights (like this one) about those details are used to distract. (I think the kids today call that "bike shedding".)
Also, I did not explicitly state that measures of wealth distribution is the central issue. I regret the omission.
--
While I have your attention: How do you think our tax regime should be structured?
Feel free to link to any prior explanations (posts) I may have missed, so you don't have to repeat yourself.
50% tax.
For perspective: UK tax rate bands are 40% between £50k-£125k, 45% above that. So 50% tax for the 1% isn't wild at all in absolute (although it's a big departure from the american approach to taxes, of course)
That seems excessive.
Corporations are persons, right? Why is their tax rate just half that of real people?
Why aren't all persons taxed equally?
The top 1% own 39% of everything in the U.S. You are not in the top 1%. Why are you complaining again?
The city claims to own my house, as they charge me rent every year, and have a long list of things I'm not allowed to do with it.
That rent went up over 10% last year. For contrast, the rent control people want to cap rent increases to 7%.
My heart bleeds for you.
If they don't wanna pay so much in taxes, they should stop having so much money. Taxes function to raise revenue and thus have to go where the money is.
There are no loopholes for investment gains. If you are talking about offsetting losses and delaying gains, those options would likely be available to endowment funds.
I think the 9 billion is very misleading. More than half goes to hospitals affiliated with Harvard. I am not sure but I don't think they get anything from the endowment. The impact of loosing this money would be very uneven across different parts of the university and hospitals affiliated with it.
The faculty of arts and science would be fine. Yes, some cuts, a hiring freeze etc. The med school and public health school would feel a big impact. They employ so many people on "soft money" through grants including many faculty members.
The hospitals are a different story and I am not sure why they are even lumped together.
Yeah this isn't purely a question of Harvard's P&L being dependent on subsidies. The money in question is grants attached to specific practices or research. The money isn't just gratuity for Harvard being so great, it's awarded for specific objectives that Harvard was deemed capable of delivering. Cutting off the money isn't going to hurt Harvard, it's going to stop all the programs the grants were funding.
Stopping those research programs is a choice. They could also choose to pay for them out of the endowment.
People here have little idea about how Harvard works. Harvard is financially vulnerable. It is currently running on a deficiency considering the endowment. And Harvard can't freely use most endowment for personnels anyway. If the government takes away funding, Harvard will have a financial crisis. I guess the leadership made the decision in hope someone could stop the government before bad things happen but when bad things do happen, you will probably see mass layoffs of researchers in particular in life sciences and biomedical research.
I mean, we literally just saw what happened at JHU when their USAID funding vanished. Everybody on that soft money got laid off.
That’s what makes stands like this hard for admin: you’re risking massive layoffs in the programs that are often the least political to defend the academic freedom of the programs that are often the most political. Columbia made one decision. Harvard is making another. You could make Lord Farquaad jokes here, but if it alone loses its federal funding in these expensive research areas, it will lose its preeminence in those areas for a long time.
I guess Harvard saw the decision at Columbia made the situation worse [1], so they decided to make a different one.
[1] https://www.science.org/content/article/nih-freezes-all-rese...
With $50B in the endowment, how are they financially vulnerable? Honest question.
Much of the endowment is earmarked towards specific ends. It is not a slush fund for discretionary spending.
Earmarked implies discretionary so it is discretionary
That's not what discretionary means in this context. The funds having been originally earmarked at the discretion of the originator, means they are no longer available for any purpose at the discretion of the trustee, meaning they are no longer discretionary. You are confusing the funds having once been earmarked at someone's discretion for their being discretionary, which they haven't been since the point when they were earmarked at the originator's discretion.
Most of it is not discretionary, no matter what words random Internet commenters use to describe it.
I am replying to the GP. GP must be mistaken. It was Harvard’s choice to operate this way financially
I understand. I am saying they are correct that much of Harvard's endowment is not discretionary, even if they accidentally used a term that implies that it is.
This might be true for Harvard, but I don’t think free speech should only be for those who can afford it. I know my school couldn’t if the government came knocking.
Harvard is free to say whatever it wants and operate without government funds. A shocking idea may be for a school to actually use the tuition paid by students to educate them.
This is forced speech for all those of us who disagree with Harvard's politics and yet have our tax dollars sent to support it anyways.
That’s a very odd perspective.
Could you explain how government research funding constitutes forced speech?
If an individual who receives a government tax credit (say EITC) speaks out contrary to your politics, is the government allowed to withhold that credit too?
My money is taken from me at gunpoint by government forces I cannot resist without facing life in prison. I don't want this money going to random causes I disagree with. The government should be far smaller or we cannot have rights as the government will intrude on us more and more.
> I don't want this money going to random causes I disagree with.
There certainly is _no_ government spending supported by _all_ Americans, so your position isn't a very practical approach to governance.
Lots of government spending is supported by the vast majority of Americans. Police, courts, fire, ambulance, and military (though size is up for debate).
1st Amendment is more important than you not liking a specific spending of government funds.
Somehow I doubt you would apply these same principles to someone who doesn't believe in police and objects to their taxes being used to fund them.
Republicans won the presidency and both branches of the legislature. The people voted for their money to no longer be spent foolishly.
So you support impinging on free speech as long as the majority of voters is against something? That's exactly the kind of thing the Constitution is meant to prevent.
Or do you agree that it is not a violation of free speech to fund police when there are citizens who disagree with it? You can't have it both ways.
I posted this deep in another part of this discussion - but the majority of the money being discussed here isn’t really for Harvard or educating its students - the largest portion are for NIH grants funding to Boston area hospitals, most of which have affiliations with Harvard Medical School.
> The Crimson analyzed the proposed Trump administration funding cuts and estimated that the five hospitals’ multi-year commitment from the NIH is over $6.2 billion and the University’s multi-year federal research funding exceeds $2.7 billion.
https://www.thecrimson.com/article/2025/4/4/funding-review-h...
I’m sure that you have legitimate issues with politics at Harvard, but penalizing a number of independent non-profits that serve the community because they associate with a University that the administration disagrees with also seems to be forcing speech.
I don't want the government to fund any of that. The government should be far far smaller. The bigger the government is, the less rights you have.
Just watch what happens when they exercise their Constiutional right to "say whatever it wants."
Stephen Miller made it clear this morning: "Under this country, under this administration, under President Trump, people who hate America, who threaten our citizens, who rape, who murder, and who support those who rape and murder are going to be ejected from this country."
If the government decides you "hate America" or your business supports some hypothetical rapist/murderer they imagined, you're going to end up ejected from this country without due process.
They're absolutely teeing up to be able to deport whoever they want. Reasonable people should be (and are) very afraid.
Irrelevant and without basis.
Basis: words of the president on various different occasions, for example Trump wants to send U.S. citizens with criminal records to be imprisoned in EL Salvador.
https://apnews.com/article/trump-citizens-prison-el-salvador...
Relevance is subjective.
That's just how government works, buddy. I disagree with my tax dollars being spent to shoot wild horses and fund Lockheed-Martin, but here we are. It's not forced speech, because you have representatives who (in a working system) you could ask to fight against tax dollars being spent on something you dislike. You have a voice, you just don't get to have the only voice.
The majority of Americans elected Republicans specifically based on their platform of eliminating waste and corruption like these funds that go to Harvard and directly fund anti Asian discrimination. The President is simply following through on his mandate. Why do you oppose democracy?
Democracy doesn't mean that a plurality of voters in a single presidential election gets to overturn the Constitution and established law.
Communicating to elected officials that you will not vote for them if they continue their current behaviour is not anti-democracy, it's the main feature of democracy. You are actively participating in the democratic process by doing so.
i disagree with you but i still think you should be allowed to drive on public roads and access publicly-funded health care that are funded by my tax dollars.
They could also possibly fire some administrators. Not every vice-provost out there is strictly necessary.
Just a few years ago, Harvard Crimson carried an op-ed complaining about the bloat:
https://www.thecrimson.com/article/2022/11/29/anderson-burea...
Cannot edit my original comment, because I wrote it 16 hours ago, but I am somewhat surprised by the fluctuating up/downvote count, going from 0 to 6 and back.
It seems that the very idea that some employees in academia might be superfluous is very disagreeable for some HNers.
Why? Institutional bloat is a well known problem, it happens in private sector, public sector, churches, military, wherever you can think of. It probably already happened in Ur and Nineveh. Why should academia be somehow immune from this problem?
And if it is not immune, shouldn't it try to do something with it?
There was a massive increase in tuition in the last generation or so. How much of that extra money goes to the core mission of the universities, and how much is spent on "nice to have extras", starting with opulent campuses and ending with "Standing Committees on Visual Culture and Signage"?
Everyone has to trim the fat down a bit from time to time. Even Google and Meta. Why not Harvard.
People are reflexive. In a different context, driven by someone else, many of the people currently defending Harvard would instead be pointing out that Harvard and the other elite institutions are part of "the problem". In general this year, it's been interesting to me to see Republicans become protectionists and Democrats become neoliberal free traders, both parties flipping their talking points to either align or disagree with Trump.
People in HN have been complaining about university admin bloat for many years. In this thread, the problem is it’s political and people struggle with the cognitive dissonance about that stuff.
This article lists out why it's not good of an idea as you think.
>Universities’ endowments are not as much help as their billion-dollar valuations would suggest. For a start, much of the money is reserved for a particular purpose, funding a specific professorship or research centre, say. Legal covenants often prevent it from being diverted for other purposes. In any case, the income from an endowment is typically used to fund a big share of a university’s operating costs. Eat into the principal and you eat into that revenue stream.
>What is more, eating into the principal is difficult. Many endowments, in search of higher income, have invested heavily in illiquid assets, such as private equity, property and venture capital. That is a reasonable strategy for institutions that plan to be around for centuries, but makes it far harder to sell assets to cover a sudden budgetary shortfall. And with markets in turmoil, prices of liquid assets such as stocks and government bonds have gyrated in recent days. Endowments that “decapitalise” now would risk crystallising big losses.
More worrying is the fact that the federal government can inflict even more harm aside from cutting off federal funding:
>the Trump administration has many other ways to inflict financial pain on universities apart from withholding research funding. It could make it harder for students to tap the government’s financial-aid programmes. It could issue fewer visas to foreign students, who tend to pay full tuition. With Congress’s help, it could amend tax laws in ways that would hurt universities.
if a $50,000,000,000 endowment can not be used to smooth things over in times of need or turbulence then the endowment managers need to make changes.
You can not possibly convince me that Harvard’s endowment doesn’t trivially have one year of liquidity in it.
I’m sure it’s not structured to handle a 7% annual draw down for the next 30 years. But it’s got plenty of time to restructure if needed.
The point is, it's eating your seed corn.
Spending a billion of it is not just spending a billion. It's spending the many billions it was meant to provide, in interest, over the next decades.
It's extraordinarily expensive to spend it directly, as opposed to spending the income it generates.
You can certainly do it, in a true emergency. But you certainly don't want to make a habit of it.
> The point is, it's eating your seed corn.
I've seen arguments of this general shape and form many times about this, and yes, this is true. In general, Harvard should not spend down it's endowment when it has other sources of revenue.
I think the issue here is that this _is_ an emergency. Harvard should consider that Federal money gone for the near future and spend and plan to spend as if they will not have it. There is no point in them continuing to exist as an institution if they accede to these absurd demands.
> You can certainly do it, in a true emergency.
This seems to qualify for many people though. Less pain than complying in many minds I am sure.
>You can certainly do it, in a true emergency. But you certainly don't want to make a habit of it.
Harvard's endowment returned 9.6% last year, growing the total by $2.5 billion. In the previous year, the endowment returned 2.9%, though the total endowment decreased as the gain was offset by contributions to operating expenses. [0]
In other words, Harvard already operates somewhat from their endowment, and can realize net endowment gains in spite of that.
[0] https://www.harvardmagazine.com/2024/10/financial-report-fis...
>In other words, Harvard already operates somewhat from their endowment, and can realize net endowment gains in spite of that.
The argument isn't that Harvard should never draw from its endowment, like it's saving for retirement or something. The argument is that they shouldn't raid endowments by doing additional withdraws to fund the current shortfall.
>The argument isn't that Harvard should never draw from its endowment, like it's saving for retirement or something
The argument I was replying to was actually of exactly this form.
That argument also implied that any endowment spending to cover shortfalls would necessarily be of the principal, but that is also incorrect.
In fact, the White House just responded with a $2.2B funding freeze—an amount that would have been covered by last year's endowment return.
> the many billions it was meant to provide, in interest
THATS WHAT WHAT THE FIFTY BILLION IS
It’s a war chest that has been carefully cultivated over decades. The fifty billion is the result of a hundred years of investment and management.
If it can’t be spent now then when the fuck exactly can it be spent? In 200 years you’d still be saying “this is the seed corn for tomorrow!!”
I’m not saying burn it down to zero. But the whole fucking point of an endowment is to provide stability during trying times. If you can’t use the interest that has been accumulated now then when the fuck can you??
No. You misunderstand endowments.
Their principal is not intended to be spent, ever. The point of an endowment is not to "provide stability during trying times".
The point is to spend the interest that it generates, in normal times, in perpetuity. Which Harvard already does and has always done. Interest from their endowment is already a large part of their revenue. That's what the endowment is for.
How much is the principle? Because I bet you $3.50 it’s multiple billion less than the current balance.
Returns fluctuate wildly, while expenses are roughly constant. So obviously expenses are drawn conservatively. And if investment works well, you can grow the endowment too. Obviously it is up to the university to strike the right balance.
The more it grows, the less risk there is in the future. But if you start spending it more than the levels of its average returns, that's high risk. And the point is it's supposed to last forever.
You also need to grow it simply to account for inflation and other rising costs.
Sounds like they have significant buffer to scratch the surface of their dragon hoard for one, perhaps even two, years.
They’d probably want to reduce spending and hit up donors if they felt they need to power through a four year stretch.
> The point is to spend the interest that it generates, in normal times, in perpetuity.
Yes, but these are not normal times.
> The point is, it's eating your seed corn.
How much is “enough” money to hoard in an endowment though? We hear lots of arguments about how the concept of a billionaire is itself obscene, why can’t we apply to same logic to institutions? E.g. much like people say “billionaires shouldn’t exist”, perhaps endowments over some similarly arbitrary value shouldn’t exist either.
Well, it's proportional to their spending to some degree. It takes a world-class endowment to fund a world-class university. And it's all from private donations.
Harvard doesn't make a profit. It educates students and does research. It sounds like you're arguing Harvard should be broken up or something? But based on what? Is it abusing its power or something?
> it's eating your seed corn
Paraphrasing J. P. Morgan, the man, in the midst of the Panic of 1907 reassuring a banker concerned about dipping into reserves to pay out depositors: "what are reserves for if not times like these."
Eat the seed corn. Fight. Then raise unencumbered donations from the billionaires whose balls haven't fallen off. If Harvard plays this correctly, they could become one of the flag bearers of the legal and financial resistance to Trump.
To some degree it already has been. After the economic genius Larry Summers paid for the Allston campus expansion with some dodgy loans that blew up in their faces during the 2008-9 financial crisis, there was some attempt to reform the endowment, back off some risky investments, and build up more of a free-cash emergency fund. This actually paid off during the Covid lockdowns, which the university was able to weather without too much disruption.
The other oddity of Harvard's endowment is that each school at the university basically has it's own fund--so that for instance, the Business school and the Law school don't have to worry about money the same way that FAS (the main undergraduate school) does.
Not to mention all those legal covenants have another party to them - they're not written in stone. I'm sure a good number of them would be willing to considering loosening legal restrictions if it would really help.
Endowments have come from people over the entire history of the institution. The vast majority of the endowers are likely deceased and won't be able to agree to change the terms of their endowment.
And yet some trust, estate, or descendant somewhere ultimately has the authority to change those agreements. These things are not immutable facts of the universe, they can be changed.
As for the minority where that is not the case, it also means nobody will have standing to sue if the school decides to stop letting someone who died 200 years ago decide exactly how Harvard's money will be spent.
They made a big fuss a few years ago about what I read imo as over investing in foreign farm land, esp south America and Africa. Which seems to have completely flopped, if not yet realized.
At this point, you really do have to question whether each university hire was merit based or not, including the fund managers.
I don't know that making a bad investment makes them terrible fund managers, just as making a good one would not make them brilliant. Don't you need a string of data points?
If you are going to claim that they were not hired on merit, and that they are bad investment managers, you'll need to provide a lot more evidence on both points, rather than a "just asking questions" post on HN. Otherwise, it's just snark and not in keeping with HN's ethos.
>...much of the money is reserved for a particular purpose
I would assume that a tax on an endowment would be like a capital gains tax, i.e., taxed on the investment growth. Is the growth 'reserved for a particular purpose'?
It's reserved because the donation was earmarked for a specific purpose (eg. a business program or whatever), not because they reserved 30% on tax owing.
>Is the growth 'reserved for a particular purpose'?
It's probably safe to assume donors are competent enough that such glaring loopholes don't exist. After all, the concept of endowments being used as long term savings, rather than spent immediately, isn't exactly a new concept. Failing to take this into account would mean any earmarks are void after a few decades.
It’s never a guarantee when it comes to government funding. It can come and go at any time. Take the politics out of it, Harvard has been operating at risk with this funding source for some time.
He's not gonna be happy they can operate financially without his assent
He still controls the congress, the white house and the supreme court. So he could potentially pull a completely illegal fast one and freeze their accounts. Since rule of law seems on fairly shaky ground right now in any case.
He may issue an EO against them similar to the ones he's successfully used to bring major law firms he doesn't like to heel: ban consideration of former Harvard employees (... maybe also graduates?) for Federal jobs, revoke clearances held by anyone employed by Harvard, and ban them from Federal property. Maybe with some other creative terms thrown in to mess with universities in particular.
> ban consideration of former Harvard employees (... maybe also graduates?) for Federal jobs
Oh, those federal jobs he’s been DOGEing for the past weeks in an attempt to demotivate folks out of them?
This administration’s incoherence comes back to bite it in the ass again.
That is always a risk of working for the government. Your job exists more or less at the whims of the currently governing administration.
>Your job exists more or less at the whims of the currently governing administration.
Perhaps in theory, but not in practice as a historical norm. And, certainly not for "standard" non-appointed, bureaucratic roles.
It's important that we don't normalize what we're seeing here, in terms of quality or degree.
No, this is not the case. This is a recent and never before seen phenomenon. Please, do not try to downplay it. And, if you do, do not do it dishonestly.
That has essentially never been a risk for a non-appointed government employee in the United States of America, at least for the past century or so. We Don't Politicize the Bureaucracy. And that was at least in part the secret sauce to our generational success, that we could immunize the workings of the government from the pique and emotion of its leadership.
Or we didn't. Now we do. Kinda sucks.
Since ~1885 and the Pendleton Civil Service Reform Act: https://en.m.wikipedia.org/wiki/Pendleton_Civil_Service_Refo...
Submitted some historical breadcrumbs here: https://news.ycombinator.com/item?id=43686221
Well this was advice my father (an academic and lifelong straight ticket Democrat) gave me decades ago. So it was nothing specific to the current administration.
The difference is that the people affected by whim were, by design, only supposed to be the political appointees, not the civil service rank and file. Those jobs existed for as long as Congress decided that they produced useful results for the American people. Positions could be eliminated by virtue of Congress deciding that a shift in policy was needed, eg fewer Kremlinologists after 1989, but that is not a whim, that is a result of debate.
The current administration is making all positions political, and in doing so, performing an end run around the legislative branch.
> he could potentially pull a completely illegal fast one and freeze their accounts
Harvard (and most institutions and powerful individuals) would be smart to maintain liquid assets and a bank account outside America’s control.
>a bank account outside America’s control
There really isn't such a thing if you want to do business in America. If you're in the US and doing business with a bank, the courts can order that bank to do things or face isolation from the entire financial system.
> There really isn't such a thing if you want to do business in America
There are to varying extents. You want a country that isn't aligned with or dependent on America, but also isn't its adversary. (And which has a good banking system.) That list was classically Turkey, the UAE and Switzerland. Today I'd add India, Qatar, Canada and Brazil and remove Switzerland.
Yeah I'm no expert in financial systems but since the money ultimately needs to be spent in the U.S. it doesn't seem that important whether the funds are frozen in the U.S. or locked away overseas and can't be transferred in for the next ~4 years.
It's much more than that, foreign banks will comply with US court orders, it's not just a blockade.
US courts shut down a series of Swiss banks that were trying to hide American's assets behind the swiss banking secrecy laws while also doing business on American soil (just having bank employees in the country did it).
> since the money ultimately needs to be spent in the U.S. it doesn't seem that important whether the funds are frozen in the U.S.
Of course it does. The hypothetical we're considering is the administration illegally freezing bank accounts. You don't need something legally impenetrable. Just complicated enough that it slows down the goons while you fight them in court.
This is true, and they have likely been accelerating the arrangements they already had for a while now. At the same time however, getting 50 billion in assets into various European jurisdictions is not at all easy. I'd estimate Trump could cut off 70-90 percent of what Harvard has to work with.
Alumni will need to come through for continuing operations if the worst does happen. And I'm certain Harvard has put some thought into that contingency as well.
Trump can make that illegal in no time. „No foreign funds” is a well known method of fighting opposition, tried and tested in many soft regimes (looking for a recent example, Hungary comes to mind).
I mean, it turns out the fed has the power to pull any money from any account they wish, at any time, like they recently did with NYC.
This is about lots more than money. Sure, Harvard can go without federal funds. Then comes federal tax breaks. Then Harvard's ability to recruit foreign students (no visas, no foreign students/professors). After that comes the really draconian stuff like the fed revoking clearances or not hiring/doing business with Harvard grads. Such things were once thought illegal but are now very much on the table. That is why Harvard needs to win the money fight no matter the numbers.
Right, money is just the first and most obvious cudgel. Does Harvard have any biomedical labs that require federal approval to handle hazardous materials? That could be delayed or revoked. Do they file taxes? They could face an audit. There's no shortage of painpoints an organization that large has exposed to an unethical government.
Harvard affiliated hospitals are dependent on NIH funding for survival. Wonder if they are included in the scope of this.
NIH falls under HHS, and the HHS acting general counsel was a signatory on the original letter.
That said, affiliated hospitals are not owned or operated by Harvard.
The affiliates could be pushed to drop their affiliation if NIH wanted to play hardball with Harvard.
According to NYT, “ of the $9 billion in federal funding that Harvard receives, with $7 billion going to the university’s 11 affiliated hospitals in Boston and Cambridge, Mass., including Massachusetts General, Boston Children’s Hospital and the Dana-Farber Cancer Institute.”
Harvard has sat on $53B tax free leveraged 40% into private equity and now might have to panic sell because their VIP status got clipped? Color me surprised.
80% of the endowment funds are heavily restricted as per donor requests and cannot be used unconditionally.
Could you give us some of these restrictions? This seems like a BS excuse to not support the students.
If I give a school 20 million yearly to research a specific form of cancer, and I find out that they instead used that money to upgrade the plumbing in their dormitories and spent nothing on cancer research, I would not give them 20 million ever again.
Sure, due to funding cuts students will suffer with slowly degrading infrastructure and will need to do plumbing fixes at some point. But that doesn't mean people who give them money for one purpose are happy with it being used for another purpose.
You might even form a contract with the institution obligating them do certain things with your gift
This is absolutely par for the course for university endowments. They're not big pots of money, they're thousands of small pots of money with various restrictions on their investment, disbursement, etc.
Not asking for the breakdown, wondering what some of those restrictions look like and whether they support the students with those restrictions.
For a quick institution specific overview, see “with donor restrictions” on page 20-21 (pdf page 21-22) of their most recent annual report[0].
I’d imagine “maintain and invest the original contribution in perpetuity” covers majority of the restricted funds, with use-specific restrictions in a distant but comfortable second. Since it’s Harvard, they probably also have more funky restrictions than the average bear (gifts of stock in kind with restrictions on timing of sale, voting, etc.).
[0]: https://finance.harvard.edu/files/fad/files/fy24_harvard_fin...
those endowments, especially for the Ivy League schools, aren't liquid at all. They'd take a massive haircut if they had to start pulling funds from it
Harvard is probably thinking they just need to draw the $1 billion extra for another 4 years. Unless, Trump runs for a 3rd time which he has floated. If that happens then I think everyone's just screwed.
With an overbearingly powerful executive like the federal US executive you can come up with so many ways to fuck with companies or institutions like this one beyond not giving them money.
It's very dangerous to assume "oh, this will only last four years". The rights currently being eroded (free speech, habeas corpus and voting rights themselves) are required for free and fair elections. Even if the term of the current Shitstain In Chief ends when it's supposed to, his replacement will be from the same cloth.
I'm sure he's got plans to issue an executive order declaring all of the votes against him null and void because they weren't cast and counted within 4 hours of each other on election day.
I agree. Also, the quality and independence of the research will improve when it is funded outside of government influence.
Which is, of course, why the internet is a spectacular failure and SpaceX is our best chance to ever put a man on the moon, and polio is still ravaging the country. Great point.