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Taxing higher education.

Byline: The Register-Guard

A recent article in The Oregonian explored the perennial question of whether Oregonians pay high taxes relative to people in other states. The answer, as always, is that it depends on what is measured. One group of people, however, can legitimately claim to be overtaxed: students at Oregon's public universities.

Oregon is a low-tax state, ranking 46th in the nation in state and local taxes as a share of personal income. At the same time, Oregon is a high-spending state, ranking ninth in the nation in state and local government spending as a share of personal income.

A low-tax, high-spending state sounds like a paradox - but it's explained by the fact that Oregon spends a lot of money from sources that aren't counted as taxes. Oregon obtains a higher percentage of its revenue from so-called non-tax sources than most other states, relying heavily on the lottery, fees for public services and tuition.

The importance of non-tax revenues as a component of Oregon's system of public finance increased after voters approved Measure 5 in 1990. The property tax limitation initiative shifted primary responsibility for funding public education to the state.

To meet this new obligation, state government froze or scaled back spending in other areas. From 1989-91 to 1999-2001, state spending on education from kindergarten through the community college level increased 291 percent. State spending on higher education at Oregon's seven universities increased 12 percent. As a percentage of university budgets, state funding has fallen by half since Measure 5.

To offset the withdrawal of the state's commitment to higher education, the Oregon University System has turned to non-tax revenue - primarily tuition. Since 1992-93, inflation, as measured by the Portland consumer price index, has climbed 32 percent. Tuition over that same decade has outpaced inflation at all seven Oregon universities, with increases ranging from 46 percent at Portland State University to 62 percent at the University of Oregon.

Tuition can be seen as a type of user fee - those who pay it receive a specific public service in return. The state has shifted away from supporting higher education through broad taxes collected from all Oregonians, in favor of a user fee collected from college students. This shift is in accord with the idea that those who benefit from government programs ought to pay for them - but only if higher education is understood to benefit college students and no one else.

That is emphatically not the case. Education has social benefits that are widely appreciated in kindergarten through high school. No one seriously proposes charging users fees to cover a significant portion of the cost of teaching students in elementary, middle or high schools, because it's agreed that everyone gains from having an educated population. These benefits do not suddenly cease when students enter universities. People's civic and financial contributions to their state is directly proportional to their level of education; public investments in education at all levels are repaid many times over.

From that perspective, tuition can be regarded as a substitute tax - a tax that has been shifted from the many to the few. By raising tuition to compensate for the withdrawal of public support, Oregon is in effect taxing higher education. Taxes discourage higher education by making it more expensive. It's lucky for Oregon, and for its universities, that the value of a college education is high enough to overcome this disincentive.

Oregon's status as a low-tax, high-spending state may cause some Oregonians to think they can have their cake and eat it, too. But at least some of the gap between taxes and spending is filled with money collected from college students, and imposing any substantial penalty on education is bad public policy. When tuition rises at nearly double the rate of inflation, the penalty must be considered substantial.
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Title Annotation:Oregon uses tuition as a substitute for taxes; Editorials
Publication:The Register-Guard (Eugene, OR)
Article Type:Editorial
Date:Jul 22, 2002
Previous Article:Letters in the Editor's Mailbag.
Next Article:Operation Snoops.

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