5 Reasons Why Free College Tuition Breaks Fundamental Business Principles

1. By discouraging productivity and career advancement. Since these government benefits have maximum income thresholds at which you no longer qualify, you’ll have less incentive to work hard and earn further raises as you approach that income level.  Families will limit those in the workforce and will have less incentive to create and invest in income-producing assets.

2. By raising prices without adding value. The price residents pay to live in a state (the taxes) will need to increase to pay for any new government handout.  However, the benefits of these programs are not enjoyed by those paying the bulk of the cost through their taxes.

3. By exhibiting anti-competitive behavior. Governments too often choose winners and losers with their tax policies and regulations.  They don’t let the free market determine the products and prices that are offered.  In the case of programs like free tuition, they go so far as to make their own state-sponsored colleges and universities clear winners over private institutions, since students can only attend SUNY institutions to get free tuition.

4. By not nurturing your best customers and by treating them poorly. Governmental entities have never had a very customer-friendly mindset, but these programs could be the worst example.  The most productive members of our society receive none of the goodies and in fact must pay for others to receive them.  If New York continues these types of policies, it’s going to drive its best customers, those with the highest incomes and thus highest taxes, to other states.

5. By investing in assets disproportionately to their useful life. Sure, many students will remain in the state, but too many will leave following their graduation, reducing the ROI (return on our investment in them) below acceptable levels.  This will only get worse as states with high levels of handouts continue to raise taxes and implement other anti-business practices to pay for them.  Businesses will also starting leaving these states with their jobs and the student exodus will get worse.