A proposed tax on some wealthy college endowments “has no clear policy objective other than raising revenue,” according to Cornell University, which joined other schools in opposing the provision in the House Republican tax bill rolled out Thursday.
Some private college endowments, many of which are at record values, would be taxed 1.4 percent on net investment income, according to the bill. The provision would increase revenue by $3 billion between 2018 to 2027, according to the joint committee on taxation.
Martha E. Pollack, Cornell’s president, said in a statement that the proposal “would likely have the perverse effect of making colleges and universities like Cornell more expensive while reducing our ability to provide quality education for economically disadvantaged students, conduct research for the public good, and undertake public engagement services.”
The tax applies to schools with assets of more than $100,000 per student and exempts small schools. Deductions for donations for seat licenses at sporting events would end. State colleges and universities aren’t included.
‘Short-Sighted’
The Association of American Universities, which represents 62 institutions, also criticized the bill, saying Thursday in a statement that it’s a “short-sighted move” that will harm students and their families.
“Endowments support substantial student aid and student service programs, and provide funding for instruction, research, and for building and maintaining classrooms, labs, libraries, and other facilities,” Mary Sue Coleman, president of the association and former president of the University of Michigan, said in the statement.
Endowments have attracted attention from Congress over the years as they have grown to record values from investment gains and donations. Harvard University, the richest U.S. college, has an endowment of $37.1 billion, followed by Yale University at $27.2 billion and Stanford University at $26.7 billion.
Colleges have argued that their endowments can’t be spent like savings accounts, and they must legally honor donor agreements binding the way money is distributed. Colleges don’t pay taxes on their investment income and donors receive tax deductions for their gifts to colleges.
Wealth Accumulation