The findings of a study raise many concerns regarding
state and federal funding strategies and fiscal inequalities
that exist in higher education in the United States.
Comparative Study of State Tax Effort
and the Role of Federal Government
Policy in Shaping Revenue Reliance
F. King Alexander
According to Niall Ferguson (2001), “the nexus between economics and politics is the key to understanding the modern world” (p. 60). In the United States, the key to understanding how colleges and universities are financed often has more to do with politics than economics. This fact makes it imperative that policymakers analyze the political dynamics and underlying economic motivations of existing higher education finance and tax policies to effectively address many of the financial challenges facing higher education today. By using current financial expenditure and tax effort data while also taking into account many of the political and economic motivations influencing federal and state higher education finance policies, I argue that federal finance policies for higher education ignore disparities in state fiscal capacity and effort. State fiscal capacity and effort are vital and pivotal aspects of any definition of an equitable system and, therefore, should frequently be considered when conducting comparative financial studies.
Ronald Ehrenberg, Don Heller, and others provided suggestions for a version of this article presented at the Cornell Higher Education Research Institute (CHERI). This chapter is a revised and updated version of a chapter titled “State Tax Effort and Federal Financing of Higher Education: Uncommon Agendas and Fiscal Practices,” in M. Christopher Brown (ed.), Equity and Access in Higher Education: Changing the Definition of Educational Opportunity. Brooklyn: AMS Press, 2002, pp. 105–126