House GOP Bill Would Tax University Endowment Income at 1.4%,
Good. It is time they started to pay their fair share.
Unfortunately for students, a tax on endowment will negatively affect aid and scholarships.
Yeah, I wouldn’t be so quick to assume this doesn’t affect the middle-class. Just one more cost to be passed on to consumers. :-q
“The tax would apply to schools with assets of more than $100,000 per student and exempts small schools, said the aide who asked not to be named because the bill isn’t yet public.”
Instead of cutting student aid colleges could provide fewer climbing walls and not manicure the lawns as frequently. But the threat to student aid gets the headlines.
They might have to hire fewer administrators and assistant deans as well, and pay for fewer conferences in Palm Springs in wintertime.
Seconded on the boat that this tax will only affect aid given to students and perhaps will even increase the prices. It doesn’t address the root of the problem or encourage any specific reduction in price by the schools.
This is way down on my list of concerns about the tax bill.
Only about 70 schools or so with $100k per student. Mostly located in the bad blue states and infested with commies.
But the impact probably hits those donut hole middle/upper middle class families – moving them from getting some amount of need based financial aid into full pay status.
Tom Sr – the plushest lazy rivers and climbing walls I’ve seen are at big state schools, not the high endowment private schools.
About the comment that says colleges could cut the climbing wall before they cut student aid: these choices are consumer driven. Many colleges are competing for students and they have learned well that really cool climbing walls and huge athletic facilities and lovely dorms matter more more to applicants than financial aid packages and faculty to student ratios. We have asked colleges to compete and this is the result. One can sneer but colleges need students and students vote with their feet on these perks.
While I don’t like the idea of taxing endowments, of bigger concern to me is that this tax on endowments is being used to generate revenue to allow for, inter alia, the elimination of the estate tax. That, in turn, may result in a significant reduction of future gifts to many colleges and universities, even those with endowments far less than $100k per student.
Few colleges (out of thousands in the US) have endowments with assets of more than $100,000 per student. Only 3 or 4 public universities (which include UT system, Michigan, Virginia, UNC). This tax will have no real impact on anything these colleges are currently doing, including financial aid.
https://en.wikipedia.org/wiki/List_of_colleges_and_universities_in_the_United_States_by_endowment.
However, it does set the precedent of taxing endowments. In the future, the federal government could expanded it, or states (and even local governments) could jump on the bandwagon. That’s why these schools are fighting it.
Hey while we are at why not tax any other charity or non profit. I think the Catholic Church has a rather large endowment and all that property they own… Lets add it all up and divide by the number of priests… make them pay too. While we are at it, large foundations… the Gates Foundation… yeah… how many employees do they have? Lets divide the tens of Billions$ in assets by the employees… great! tax them too. I am sure if the government looks hard enough they can find a few orphanages and other tax-dodgers — oh I mean charities — and figure out a way to make them pay too. Great… meanwhile lets give corporations a huge tax break which by the way has no correlation to corporations actually creating more jobs…
^^^Yes, taxing these groups could very well happen in the future…
Correction: public colleges and universities would be exempt. Institutions with fewer than 500 students would be exempt, too.
LOL. There may be thousands of universities in the U.S. but, this particular list includes virtually every member of the AAU (the private ones); every member of COFHE; virtually every college or university in the U.S. that offers to meet 100% need-based aid. Not all colleges are equal.
Congress is rummaging around for cash here and there to offset reduced taxes for the rich. I’m not sure they have any more specific social purpose in mind. We can try to find one, but that would be doing the devil’s work.
Sometimes the correct answer is the simplest one. Like this old story about when Willie Sutton was asked: Q. “Why do you rob banks?” A. “Because that’s where the money is.”
Approximately 150 according to the New America Foundation (whatever that is), but it was referenced in the LATimes.
Donations for naming rights to buildings and departments should not be deductible too - a loophole that colleges have been cleverly exploiting. Naming the University of Chicago Economics department (for 125M) or Stanford’s Computer Science department after you has no “value” to you?
The $100k per student threshold is pretty low. My sources show 160 schools at that level. Many don’t meet full financial need because they can’t afford to. An endowment of $100K per student would give you an annual payout of $4K to $5K per student, at an annual payout rate of 4% to 5% which is standard. Most of these schools rely pretty heavily on endowment payouts to fund institutional FA.
This won’t matter to HYPS-level schools which have literally millions per student, except insofar as it sets a precedent for government raids on their endowments. It matters more to schools like, say, Saint Louis U, or Willamette, or Rollins College. These aren’t super-wealthy schools. It won’t kill them, but it’s just one more financial challenge that will make it harder for them to provide FA while transferring what amounts to chump change to the federal government to offset massive tax cuts for corporations and the uber-wealthy.