<p>The news that Warren Buffet's secretary pays a higher tax rate than Mr. Buffet has been all over the news lately, of course. This has become sort of a rallying cry for the current administration to change the tax law so the very wealthy 'pay their fair share.' </p>
<p>Mr. Buffet does not draw a conventional salary - rather his pay is based upon returns on investments which are taxed at a lower rate than wages. My question has to do with the fact that many college scholarships are funded by the investment returns on a college's endowment. If the tax laws are changed to take a bigger cut of investment income, will this negatively impact money that a college has available for student aid?</p>
<p>One of the proposals about 2 years ago was to limit the tax deductibility of donations by wealthy individuals. For example, instead of a person in a 35% tax bracket getting to deduct 35% of the value of their donation to a university, they would only be able to deduct 25%. The universities in particular opposed that idea because they felt it would lead to fewer big contributions. </p>
<p>Right now, for example, a guy can donate $6 million to a university to get a building named after himself, but it may only cost him a net of $4 million after his taxes are reduced.</p>
<p>*a guy can donate $6 million to a university to get a building named after himself, but it may only cost him a net of $4 million after his taxes are reduced. *</p>
<p>:)</p>
<p>lol…it will “only” cost him $4M after his taxes are reduced. </p>
<p>Thank goodness for such donations. Donations directly to universities and other well managed charities are less likely to be wasted. If someone donates $5M to get a building built, then the building gets built.</p>