Is it Time to Start Taxing College Endowments?
Some colleges are sitting on endowments worth hundreds of millions of dollars. Should they be taxed?
Howard Gleckman explores the issue in a new column at Forbes.
Should College Endowments Be Taxed?
Last week, the often-provocative Victor Fleischer rocked the higher education world with a New York Times op-ed that accused universities of hoarding their often-enormous endowments instead of spending the funds on student aid.
Vic, a tax law professor at the University of San Diego, suggested that colleges be required to spend at least 8 percent of their endowments each year. But he could have asked a more fundamental question: Why are these funds tax-exempt at all.
There is no doubt that tax-exempt status is enormously beneficial to universities. They are exempt from local, state, and federal income taxes. They are exempt from property taxes, even as they receive an estimated $80 billion in support from state and local governments, according to a study by the Nexus Research & Policy Center. Some schools do make voluntary payments in lieu of property taxes, but many do not.
Even their non-academic income, from the sale of everything from football skyboxes to tee shirts and computers, is often tax-free (though in theory the law requires them to pay tax on this unrelated business income). Thanks to their special status, universities often finance capital projects with tax-exempt bonds.
Not only are gifts from well-heeled alumni deductible to the givers, but investment earnings on the cash hoards are tax-exempt. These endowments are enormous, topping $500 billion according to one estimate. And they are highly concentrated. In 2014, the top 10 schools held nearly one-third of those assets.
Comments
It seems rather fitting. Just as the French monarchy confiscated the Templars’ wealth, and the English monarchy confiscated the Catholics’ wealth, now the American oligarchy is going after the wealth of the nation-state’s priesthood, the corporate universities. Funny that these supposedly intelligent academics didn’t see this coming.
Hot on the heels of their same sex SC victory Liberals are now clamoring to end tax exempt status for churches. I say why not, and while we’re at it end ALL tax exempt status for everything including charities, foundations, non-profits, political groups, and so forth.