I read it. You can find it HERE. It’s not what you think it is.
Summary: Sanders’ plan requires State participation and investment, and would significantly limit the school choices for students. But it would make school affordable for many students who otherwise would not be able to pay for it. Affordable, but not free, when including room and board, books, etc.
Time for a breakdown. Here we go:
TITLE I—FEDERAL-STATE PARTNERSHIP TO ELIMINATE TUITIONSEC. 101. GRANT PROGRAM TO ELIMINATE TUITION AND REQUIRED FEES AT PUBLIC INSTITUTIONS OF HIGHER EDUCATION.
That’s our first title, and what it tells you is that this isn’t a Federal program alone, it’s a State and Federal program. In turn, that means that States have to sign on. The King v. Burwell precedent from the ACA litigation is going to still control, and that means we’re not talking about free tuition everywhere, just in blue States.
(1) GRANTS AUTHORIZED.—From amounts appropriated under subsection (f), the Secretary of Education (referred to in this section as the “Secretary”) shall award grants, from allotments under subsection (b), to States having applications approved under subsection (d), to enable the States to eliminate tuition and required fees at public institutions of higher education.
(2) MATCHING FUNDS REQUIREMENT.—Each State that receives a grant under this section shall provide matching funds for a fiscal year in an amount that is equal to one half the amount received under this section for the fiscal year toward the cost of reducing the cost of attendance at public institutions of higher education in the State.
That’s your formula — 2/3 Fed, 1/3 State. So if Sanders’ own estimate is right, that the cost to the Feds is $750B over 10 years, that means the States are going to have to come up with $375B, and they can’t tax Wall Street.
So how much do they get? Well, that’s interesting, and the legislation quite clearly institutionalizes the vast differences in education spending from State to State:
(b) Determination Of Allotment.—
This is how the dollars are determined.
(1) INITIAL ALLOTMENT.—For fiscal year 2016, the Secretary shall allot to each eligible State that submits an application under this section an amount that is equal to 67 percent of the total revenue received by the State’s public system of higher education in the form of tuition and related fees for fiscal year 2016. For each of fiscal years 2017 through 2019, the Secretary shall allot to each eligible State that submits an application under this section—
(A) an amount equal to the allotment the State received for fiscal year 2016, plus
(B) if the State provides additional funds toward the cost of reducing the cost of attendance at public institutions of higher education in the State for any of such fiscal years that is more than the matching funds requirement under subsection (a)(2), an amount equal to such additional funding provided by the State, which amount provided by the Secretary may be used for the activities described in subsection (e)(2).
Ummm, wow. So the State gets 2/3 of the revenue it received in the form of tuition and related fees? That, by the plain language of the statute, would exclude money spent by the State from general funds, lottery funds, special education funds, etc., and include only tuition and related fees. So States that subsidized education the most would get the least? That’s how it reads. If so, this is a total non-starter, and the legislation is a complete sham — a promise written in unrealistic numbers to make it seem possible. If that is really what is intended, kill it now. Just forget it, and stop even pretending it was realistic.
But, in the interest of fairness, let’s assume it doesn’t really mean what it says, and that what it is really intended to do is replace all State spending on higher education. Okay? Is that fair, at least for the sake of discussion?
Even under that reasoning, there are problems. California’s budget is $10.5B, while Vermont’s is $84M. More important, New Hampshire is $104/capita, while Wyoming is $606/capita. So we start with that spending (assuming it’s not really tuition, which would make the whole thing a farce), and see right away that the new Federal program would instantly endorse unequal spending decisions made State-by-State, and pay for those decisions with Federal money. How long do you think that would last without challenge, either in Congress or in the courts? Yeah, not very long. If the money is coming from DC, paid via New York, what justification is there to spend so much less in one State than another?
And for years after 2016, while the States can increase their spending, they only get a one-to-one match in Federal funds, rather than the initial two-to-one match, making future State spending far more expensive than past State spending.
(2) SUBSEQUENT ALLOTMENTS.—Beginning in fiscal year 2020, the Secretary shall determine the median allotment per full-time equivalent student made to all eligible States under this section for fiscal year 2019 and incrementally reduce allotments made to States under this section such that by fiscal year 2025, no State receives an allotment under this section per full-time equivalent student that exceeds the median allotment per full-time equivalent student made under this section for fiscal year 2019.
Oh look, starting in 2020 there is an “evening out” of the money. Except, it comes down, instead of going up. So a State that was spending a lot of money on education gets a whole lot less, dropping the median, while a State that was spending less doesn’t get more. The median just keeps dropping to the lowest common denominator.
Do people really think this is a good idea?
(c) State Eligibility Requirements.—In order to be eligible to receive an allotment under this section for a fiscal year, a State shall—
Okay, so what does a State have to do to stay in the system?
(1) ensure that public institutions of higher education in the State maintain per-pupil expenditures on instruction at levels that meet or exceed the expenditures for the previous fiscal year;
You have got to be kidding me! So one-half of the States, the ones actually trying to fund their higher education, get less starting in 2020, but the State has to keep paying just as much? So now the funding will go down from 2-1 to perhaps 1-1, or even less? This is insane. In the meantime, they have to do just as much with even less than they had before? So the University of California system is going to have funding from the feds that matches funding to Missouri, but has to put just as much California money into it, while trying to maintain their standards? Interesting.
(2) ensure that tuition and required fees for in-State undergraduate students in the State’s public higher education system are eliminated;
Hey guys, we get less money, but we can’t charge tuition. Terrific!
(3) maintain State operating expenditures for public institutions of higher education, excluding the amount of funds provided for a fiscal year under this section, at a level that meets or exceeds the level of such support for fiscal year 2015;
Okay, this one’s not a big deal. Except, it hints that when it said “tuition” up above, it really meant “tuition.” And that’s nuts.
(4) maintain State expenditures on need-based financial aid programs for enrollment in public institutions of higher education in the State at a level that meets or exceeds the level of such support for fiscal year 2015;
(5) ensure public institutions of higher education in the State maintain funding for institutional need-based student financial aid in an amount that is equal to or exceeds the level of such funding for the previous fiscal year;
Huh? Why do they have to spend just as much on need-based student financial aid if students don’t have to pay tuition? Somebody please explain this one.
(6) provide an assurance that not later than 5 years after the date of enactment of this Act, not less than 75 percent of instruction at public institutions of higher education in the State is provided by tenured or tenure-track faculty;
A lovely goal, but the money just dropped through the floor for the highest-paying half of the States in the country.
(7) require that public institutions of higher education in the State provide, for each student enrolled at the institution who receives for the maximum Federal Pell Grant award under subpart 1 of part A of title IV of the Higher Education Act of 1965 (20 U.S.C. 1070a et seq.), institutional student financial aid in an amount equal to 100 percent of the difference between—
(A) the cost of attendance at such institution (as determined in accordance with section 472 of the Higher Education Act of 1965 (20 U.S.C. 1087ll)), and
(i) the amount of the maximum Federal Pell Grant award; and
(ii) the student’s expected family contribution
So in addition to the funding discussion above, now they have to make up the difference between costs and Pell grant money? This is starting to sound like a whole lot of new unfunded mandates, the kind the Supreme Court doesn’t like.
and
(8) ensure that public institutions of higher education in the State not adopt policies to reduce enrollment.
Same enrollment, less money.
(d) Submission And Contents Of Application.—For each fiscal year for which a State desires a grant under this section, the State agency with jurisdiction over higher education, or another agency designated by the Governor or chief executive of the State to administer the program under this section, shall submit an application to the Secretary at such time, in such manner, and containing such information as the Secretary may require.
Only States that want to participate will need to submit applications. Guess which States will want to participate? The Democratic States that spend low amounts of money on higher education. The higher-paying States, even if they’re blue as blue can be, won’t want any part of it, for the reasons noted above.
(e) Use Of Funds.—
How do they get to use the money?
(1) IN GENERAL.—A State that receives a grant under this section shall use the grant funds and the matching funds required under this section to eliminate tuition and required fees for students at public institutions of higher education in the State.
First, reduce tuition. Okay, got it.
(2) ADDITIONAL FUNDING.—Once tuition and required fees have been eliminated pursuant to paragraph (1), a State that receives a grant under this section shall use any remaining grant funds and matching funds required under this section to increase the quality of instruction and student support services by carrying out the following:
(A) Expanding academic course offerings to students.
(B) Increasing the number and percentage of full-time instructional faculty.
(C) Providing all faculty with professional supports to help students succeed, such as professional development opportunities, office space, and shared governance in the institution.
(D) Compensating part-time faculty for work done outside of the classroom relating to instruction, such as holding office hours.
(E) Strengthening and ensuring all students have access to student support services such as academic advising, counseling, and tutoring.
(F) Any other additional activities that improve instructional quality and academic outcomes for students as approved by the Secretary through a peer review process.
Second, you have to put any additional money back into education. Savings may not be spent elsewhere. Not even State money. So the Feds are now controlling the State use of its budget, even if the State is meeting all its obligations. Interesting. How long do you think that will last in court?
(3) PROHIBITION.—A State that receives a grant under this section may not use grant funds or matching funds required under this section—
(A) for the construction of non-academic facilities, such as student centers or stadiums;
(B) for merit-based student financial aid; or
(C) to pay the salaries or benefits of school administrators.
Oh for fuck’s sake! Do we really think school administrators, the people who enroll students, who handle disciplinary issues, who manage dormitories, and a thousand other things, aren’t part of running a successful university? Is there some imaginary university where the kindly professor meets the students under the ol’ oak tree to impart knowledge, while they nibble their brown-bag lunches?
(f) Authorization And Appropriation.—There are authorized to be appropriated to carry out this section $47,000,000,000 for fiscal year 2016, and such sums as may be necessary for each of the fiscal years 2017 through 2025.
And the cost? $47B the first year, and whatever is necessary for the years to follow.
Let’s skip to the funding, shall we? Perhaps we’ll return another day to talk about student loan interest rates (Title II), work-study programs (Title III), and timely matriculation (TItle IV).
TITLE V—OFFSET
How is this paid for?
SEC. 501. SHORT TITLE.
This title may be cited as the “Inclusive Prosperity Act of 2015”.
Gag me with a spoon.
SEC. 502. TRANSACTION TAX.
(a) In General.—Chapter 36 of the Internal Revenue Code of 1986 is amended by inserting after subchapter B the following new subchapter:
Ah, so we’re going to tax something, are we? What are we going to tax?
SEC. 4475. TAX ON TRADING TRANSACTIONS.
Thank you.
(a) Imposition Of Tax.—There is hereby imposed a tax on the transfer of ownership in each covered transaction with respect to any security.
Yikes! “Any security” is pretty broad language. But I’m not going to jump to conclusions. Let’s keep reading.
(b) Rate Of Tax.—The tax imposed under subsection (a) with respect to any covered transaction shall be the applicable percentage of the specified base amount with respect to such covered transaction. The applicable percentage shall be—
“(1) 0.5 percent in the case of a security described in subparagraph (A) or (B) of subsection (e)(1),
“(2) 0.10 percent in the case of a security described in subparagraph (C) of subsection (e)(1), and
“(3) 0.005 percent in the case of a security described in subparagraph (D), (E), or (F) of subsection (e)(1).
Half a percent?! I can’t wait to get to subsection (e)(1).
(c) Specified Base Amount.—For purposes of this section, the term ‘specified base amount’ means—
“(1) except as provided in paragraph (2), the fair market value of the security (determined as of the time of the covered transaction), and
“(2) in the case of any payment described in subsection (h), the amount of such payment.
That’s not the traditional meaning of the word “base.” And hey, how does that work? If you’re selling on the open market, you’re selling for fair market value, so what is there to tax? Keep reading.
(d) Covered Transaction.—For purposes of this section, the term ‘covered transaction’ means—
“(1) except as provided in paragraph (2), any purchase of a security if—
“(A) such purchase occurs or is cleared on a facility located in the United States, or
“(B) the purchaser or seller is a United States person, and
“(2) any transaction with respect to a security described in subparagraph (D), (E), or (F) of subsection (e)(1), if—
“(A) such security is traded or cleared on a facility located in the United States, or
“(B) any party with rights under such security is a United States person.
Attorneys are going to make a mint creating corporate entities outside the US to hold stock and trade on foreign exchanges. Of course, that will only help the wealthy this tax is supposed to hit. But if you’ve got a few ducats in the market, or that’s where your retirement money is found, well, good luck.
(e) Security And Other Definitions.—For purposes of this section—
“(1) IN GENERAL.—The term ‘security’ means—
“(A) any share of stock in a corporation,
“(B) any partnership or beneficial ownership interest in a partnership or trust,
“(C) any note, bond, debenture, or other evidence of indebtedness, other than a State or local bond the interest of which is excluded from gross income under section 103(a),
“(D) any evidence of an interest in, or a derivative financial instrument with respect to, any security or securities described in subparagraph (A), (B), or (C),
“(E) any derivative financial instrument with respect to any currency or commodity including notional principal contracts, and
“(F) any other derivative financial instrument any payment with respect to which is calculated by reference to any specified index.
“(2) DERIVATIVE FINANCIAL INSTRUMENT.—The term ‘derivative financial instrument’ includes any option, forward contract, futures contract, notional principal contract, or any similar financial instrument.
“(3) SPECIFIED INDEX.—The term ‘specified index’ means any 1 or more of any combination of—
“(A) a fixed rate, price, or amount, or
“(B) a variable rate, price, or amount, which is based on any current objectively determinable information which is not within the control of any of the parties to the contract or instrument and is not unique to any of the parties’ circumstances.
“(A) IN GENERAL.—An exchange shall be treated as the sale of the property transferred and a purchase of the property received by each party to the exchange.
“(B) CERTAIN DEEMED EXCHANGES.—In the case of a distribution treated as an exchange for stock under section 302 or 331, the corporation making such distribution shall be treated as having purchased such stock for purposes of this section.
Definitions matter. This includes far more than stock. It includes ownership in pretty much anything except personal property, including everything from a share of Berkshire Hathaway to the partner interest in your deceased wife’s small business. (e)(1)(C) is interesting — that’s promissory notes, so when your mortgage goes from one bank to another, there’s a fee. Do you think that will add to the cost of a home loan, or a car loan, or any other loan with paper? Yeah, I do too.
But hey, who really pays this. Just the oligarchs, right? Let’s see.
(f) Exceptions.—
That’s promising.
(1) EXCEPTION FOR INITIAL ISSUES.—No tax shall be imposed under subsection (a) on any covered transaction with respect to the initial issuance of any security described in subparagraph (A), (B), or (C) of subsection (e)(1).
IPOs are excluded. Given that the people who get pieces of big IPOs are the people with big accounts with the house offering them, that’s not really going to help the little guy, is it?
(2) EXCEPTION FOR CERTAIN TRADED SHORT-TERM INDEBTEDNESS.—A note, bond, debenture, or other evidence of indebtedness which—
“(A) is traded on a trading facility located in the United States, and
“(B) has a fixed maturity of not more than 60 days,
shall not be treated as described in subsection (e)(1)(C).
So short-term loans aren’t taxed, just long-term loans. I wonder what the reasoning behind that is?
(3) EXCEPTION FOR SECURITIES LENDING ARRANGEMENTS.—No tax shall be imposed under subsection (a) on any covered transaction with respect to which gain or loss is not recognized by reason of section 1058.
It doesn’t apply to security swaps. Okay. No help for the little guy yet.
(g) By Whom Paid.—
So who pays this? (as if we didn’t know it ultimately goes to the consumer)
(1) IN GENERAL.—The tax imposed by this section shall be paid by—
“(A) in the case of a transaction which occurs or is cleared on a facility located in the United States, such facility, and
“(B) in the case of a purchase not described in subparagraph (A) which is executed by a broker (as defined in section 6045(c)(1)), the broker.
No surprise there.
(2) SPECIAL RULES FOR DIRECT, ETC., TRANSACTIONS.—In the case of any transaction to which paragraph (1) does not apply, the tax imposed by this section shall be paid by—
“(A) in the case of a transaction described in subsection (d)(1)—
“(i) the purchaser if the purchaser is a United States person, and
“(ii) the seller if the purchaser is not a United States person, and
“(B) in the case of a transaction described in subsection (d)(2)—
“(i) the payor if the payor is a United States person, and
“(ii) the payee if the payor is not a United States person.
WTF? Wait a minute! So the purchaser pays the tax, even though the seller gets the money? Really?
(h) Certain Payments Treated As Separate Transactions.—Except as otherwise provided by the Secretary, any payment with respect to a security described in subparagraph (D), (E), or (F) of subsection (e)(1) shall be treated as a separate transaction for purposes of this section, including—
“(1) any net initial payment, net final or terminating payment, or net periodical payment with respect to a notional principal contract (or similar financial instrument),
“(2) any payment with respect to any forward contract (or similar financial instrument), and
“(3) any premium paid with respect to any option (or similar financial instrument).
Alright, so we’re making sure games aren’t played where the company gets to define the security. That makes sense.
So how about the little guy? We haven’t heard about him yet.
SEC. 503. OFFSETTING CREDIT FOR FINANCIAL TRANSACTION TAX.
(a) In General.—Subpart A of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to nonrefundable personal credits) is amended by inserting after section 25D the following new section:
Ah, I knew it was here somewhere.
(a) Allowance Of Credit.—In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the tax paid during the taxable year under section 4475.
What the heck is section 4475? Hang on a second, let me look. Found it! It’s another Sanders bill. It has a single co-sponsor, which is one more than the college bill. Its purpose is “To impose a tax on certain trading transactions to invest in our families and communities, improve our infrastructure and our environment, strengthen our financial security, expand opportunity and reduce market volatility.” Yes, it’s exactly the same tax Sanders hopes to impose to pay for college, except he also uses it to pay for infrastructure. And for every single individual, it’s a complete wash. They only pay it once.
That leads to a question — when discussing how much money each version of the tax will raise, does Sanders credit the full amount, even though the money can only be spent once? If so, well, what a freakin’ sham that would be.
(b) Limitation Based On Modified Adjusted Gross Income.—
“(1) IN GENERAL.—Subsection (a) shall not apply to a taxpayer for the taxable year if the modified adjusted gross income of the taxpayer for the taxable year exceeds $50,000 ($75,000 in the case of a joint return and one-half of such amount in the case of a married individual filing a separate return).
Oh crap. Hang on a second. If you make more than $50K/year, or if you and your spouse make more than $75K/year, you pay the tax twice! Yes, twice. So that 0.5% tax? It’s now a 1% tax. And while you might like a job that pays $50K/year, it ain’t exactly the top 1% of the top 1%.
Conclusion
There you go. That’s Sanders “free college” plan, and how he hopes to pay for it.
It doesn’t sound quite as great to me when you look at the details as when you put it on a bumper sticker.
How does it sound to you?