Recently a number of people have written to me about the “Pay it Forward” concept for funding higher education in Washington. The basic idea as described on the Economic Opportunity Institute website: (www.eoionline.org)
Pay It Forward: A Debt-Free Degree
- Students attend college with no upfront tuition or fees. Instead, students contribute a small, fixed-percentage of their income for a predetermined number of years.
- Contributions are placed in a public higher education trust fund that funds education for the next generation of students, giving each new cohort the same opportunity to attend college
It’s a cool idea that provides upward mobility for more kids and doesn’t expose them to debt that many will have difficulty repaying. The implementation is a little more difficult. To make this work you have to forego tuition and fee revenue (over 60% of our higher education budget today) for a significant period of time, until the revenue from the payment stream catches up. This would be, most likely, at least a decade of covering well over a billion dollars a year. We don’t have this much money and are not likely to given our current obligations.
My second concern is revenue collection. To do this you are essentially enacting an income tax, with all the complexity that entails. It might pass constitutional muster as a “fee” instead of a tax, since it only affects people who got the education. If this is a good or bad thing is your personal opinion, but we would have to staff up the Department of Revenue and write the same level of regulation that is required to do an income tax, plus enforce it even on people who don’t live in state or the country any more. I foresee some difficulty here.
A similar idea that might be easier to implement would be to start with the revenue side, since we would have to enact revenue to implement the Pay it Forward idea anyway. If you enacted a capital gains tax of about 5% with a $10,000 annual exemption and an exemption for increases in the value of your primary home you would bring in about $500 million a year. Putting this into a constitutionally protected endowment and just paying out earnings on the account would generate enough revenue to guarantee every young person in Washington a full ride in 15-20 years. In the interim you just start increasing our investment in the state need grant, working your way up the income scale until you get to everyone.
You can’t consider the pay it forward idea without being honest that it requires significant revenue up front. To approve it would require a billion dollar a year or more tax, or immense borrowing that would vastly exceed the state’s borrowing limit.