Taxing The Rich To Compensate The Rich
Mikhail Shifman is the kind of professor universities fight over. His discoveries, research and teachings are key reasons the University of Minnesota’s physics department is highly regarded.
So when Penn State tried to recruit him, the U countered with a bump in salary, a renovated office and $25,000 per year for five years to pay a research collaborator. In total, it was less than Penn State’s offer, Shifman said, but the U won out.
The article also notes the national and international competition for star-power professors.
In its effort to be among the top-three research universities, the U has focused on hiring superstar researchers who require “compensation, plus facilities, plus support staff, plus instruments,” said professor Judith Martin, chair of the University Senate Finance and Planning Committee.
“This isn’t a local market,” Martin said. “Particularly in the sciences, it’s an international market. That’s not always well-understood by students and, from my perspective, the public. People think anybody could teach a class.” …
Recently, the U has faced “a real escalation” in competition to keep the star professors, said Provost Thomas Sullivan. “The reputation of a university rests on the reputation of its faculty,” he said.
During the 2007-08 school year, the Twin Cities’ faculty of about 2,300 received 111 offers from other universities that the U countered. The year before, there were fewer than 100. The counter-offers usually include a mix of “additional salary, additional lab space and greater support for graduate students,” Sullivan said, and their cost is borne by individual colleges or departments.
An inference from the STrib story that will certainly be made by the tax increase crowd, is that the state needs to generate more tax dollars so it can spend more on higher education to keep the University of Minnesota competitive. The state needs to provide more tuition aid so that students aren’t faced with tuition increases. And of course, those tax increases must be paid for by “the rich” – you know, like those highly sought after college professors that the University is paying well over six figures to attract and keep.
So, when the University increases student tuition, not all of the increase goes to pay a highly skilled professor for the actual value delivered to the student and the University; the student also pays increased tuition to cover Minnesota’s higher individual income tax rate on high earners. Lab technicians, professors without tenure, cafeteria workers and other University employees with relatively interchangeable skills, receive lower wages than they otherwise might because the University is not just compensating the star-power professor for his value students and to the University; the University must overcompensate the professor for his actual value to compensate him for Minnesota’s tax code.
There’s an ironic circularity in all this: The state, we are told, needs to raise taxes on the state’s highest earners so the state has the money to invest in higher education and student tuition aid to compensate for increased costs of attracting star-power professors – who require salaries that put them among the state’s highest earners.
As I noted in a recent Pioneer Press column –
A uniquely skilled individual commanding a high salary can work just about anywhere he chooses. The mobile worker, the kind who pays the most taxes, will gravitate to where his net income, not gross income, is highest. To lure and keep highly productive individuals in Minnesota, Minnesota employers, including school districts looking for superintendents and universities seeking nationally known professors, must pay higher gross salaries to compete with low-tax states.
Higher salaries for those already earning top dollar don’t just increase the salary gap; they contribute to higher consumer prices and lower wages for non-mobile workers — the rest of us. When a company pays top-earners more to compensate for high tax rates, it means fewer dollars available to pay the rest of a company’s employees, further increasing the real wage gap irrespective of what the Tax Incidence percentages indicate.
Sensible, economics-based tax reform, “economics” being one of the subjects taught at those institutions of higher learning, might consider reducing income-taxes to make Minnesota more attractive to highly skilled and mobile individuals. Certainly we should not make it even more difficult and expensive for the University by raising taxes on the people it is trying to hire.
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