Decreasing a subsidy is not a tax increase

(Victor Joecks/NPRI) – Nevada’s higher education officials either don’t understand the difference between decreasing a subsidy and a tax increase or they’re conflating the two terms for political purposes.

You decide.

Gov. Brian Sandoval’s guiding philosophy in building a state budget has been his promise not to raise taxes or fees.

In this economy, he argues, businesses and families just can’t afford to pay more to fund their government. Except, that is, for students.

Sandoval this week suggested to higher education officials that they could “significantly” increase tuition to colleges and universities to offset his proposed cuts in state funding, according to higher education officials.

They were unhappy, wondering why they appeared to be exempt from Sandoval’s viewpoint on the budget and economy.

“The statement that Nevada can’t afford higher taxes, but (higher education) can afford higher fees is hard to understand,” said Gregory Brown, a professor at UNLV and vice president of the Nevada Faculty Alliance. “It runs counter to principles he seems committed to.”

It’s not the first inconsistency in Sandoval’s ideology, which he has embraced with surprising gusto since entering the race for governor in September 2009.

The difference between a tax or fee and tuition should be obvious, but in case it’s not, let’s review how a tax works, using the sales tax as an example.

If you purchase a product for $10 and the government charges you an 8 percent sales tax (80 cents), your total bill is $10.80. If the government increased the sales tax to 9 percent, you’d pay 90 cents to the government and your total would be $10.90. What you buy is your purchase. The tax is simply an additional cost.

Let’s review how higher education works. Nevada state government gives the Nevada System of Higher Education hundreds of millions of dollars a year. For the sake of discussion let’s say $500 million (although University Ron Knecht has noted that the current government subsidy to NSHE is substantially higher).

This $500 million a year allows the NSHE to charge its students less than it would if the government wasn’t giving it taxpayer dollars. If Nevada decides to “only” give the NSHE $250 million a year, Nevada’s colleges and universities will either have to cut back (employees’ salaries or programs), raise tuition or increase their private fundraising (or some combination of all three).

If the NSHE decides to increase tuition, that’s not a tax increase. Tuition is the cost of the service a student purchasese. Claiming that a tuition increase is a tax increase would be like a saying it’s a tax increase if McDonalds raised the price of Big Macs. The price of the product shouldn’t be confused with taxes.

Don’t be fooled or manipulated by this type of rhetorical game. Decreasing or even eliminating the subsidy given to the NSHE isn’t a tax or fee increase and would be entirely consistent with Gov. Sandoval’s commitment not to raise taxes or fees.