{"id":139942,"date":"2024-01-05T00:02:51","date_gmt":"2024-01-05T05:02:51","guid":{"rendered":"https:\/\/www.thecollegefix.com\/?p=139942"},"modified":"2024-01-04T14:56:56","modified_gmt":"2024-01-04T19:56:56","slug":"policy-experts-right-to-left-weigh-in-on-taxing-university-endowments","status":"publish","type":"post","link":"https:\/\/www.thecollegefix.com\/policy-experts-right-to-left-weigh-in-on-taxing-university-endowments\/","title":{"rendered":"Policy experts, right-to-left, weigh in on taxing university endowments"},"content":{"rendered":"

Only a handful of colleges have significant endowments<\/strong><\/em><\/p>\n

President Donald Trump has suggested<\/a> taxing the endowments of large private universities to pay for a free, online \u201cAmerican Academy<\/a>.”<\/p>\n

Increasing the tax on endowments has won support<\/a> from other Republicans and conservatives.<\/p>\n

The College Fix<\/em> surveyed several policy experts to discuss the pros and cons of the idea.<\/p>\n

\u201cWhile an endowment tax might affect how a small group of colleges operate, most students attend schools that would see little to no impact from a heavier endowment tax,\u201d Preston Cooper, a senior fellow with the Foundation for Research on Equal Opportunity, told The Fix<\/em> via email.<\/p>\n

This is because most \u201cuniversity endowment wealth belongs<\/a> to just 120 universities, even though there are thousands of colleges nationwide,\u201d Cooper said.<\/p>\n

According to Cooper, the 1.4% tax from President Trump 2017 Tax Cuts and Jobs Act \u201craised 68 million\u201d from 33 institutions.<\/p>\n

He said universities might adjust behavior to avoid paying more in taxes, such as spending more on financial aid or increasing enrollment.<\/p>\n

\u201cFor instance, if the [heavier] tax only applied to schools with endowments greater than a certain dollar amount per student, colleges might try to increase their enrollment in order to stay below the taxation threshold,\u201d Cooper said. \u201cI’ve seen other proposals to give universities a break from the endowment tax if they spend more on financial aid.\u201d<\/p>\n

Ben Ritz with the Progressive Policy Institute said taxing universities to push them to spend more on students is a good idea, but it won\u2019t work as a way to raise significant revenue.<\/p>\n

\u201cThe funding of this academy is nonsense. Trump wants to establish an online university using revenue from endowment tax,\u201d Ritz, who directs the think-tank\u2019s funding research projects, told The Fix<\/em> in a phone interview. \u201cThe current endowment tax raises about 70 million a year, yet many online universities have multi-billion-dollar budgets. This tax would only raise a small fraction of a university\u2019s costs.\u201d<\/p>\n

\u201cIt’s good tax policy to push universities with large endowments to use the money for real, educational purposes, but this particular scheme is ridiculous, and it is not a significant source of revenue for the government,\u201d Cooper said.<\/p>\n

MORE:<\/strong> Harvard fails to get endowment tax repealed<\/a><\/p>\n

A former economics professor who studies college affordability said the reason for not taxing universities has diminished.<\/p>\n

Richard Vedder, a senior fellow with the Independent Institute and former economist at Ohio University, said the general idea behind not taxing universities was that they provided \u201cpositive externalities.\u201d<\/p>\n

\u201cThe argument always was that there were benefits of higher education that were unusual,\u201d Vedder told The Fix<\/em> during a phone interview. He gave examples of how a college educated worker would model discipline and other business skills in the workplace and help improve his place of employment.<\/p>\n

Now, \u201cbad things [are] coming from universities,\u201d Vedder told The Fix<\/em>, mentioning the proliferation of \u201cdiversity, equity, and inclusion\u201d initiatives. He made similar arguments in a December Wall Street Journal<\/em> piece<\/a>.<\/p>\n

He said there are arguments for both sides, but it is worth discussing \u201ctaxing universities instead of subsidizing them.\u201d<\/p>\n

Trump\u2019s motive for the tax is that universities have pushed left-wing ideologies.<\/p>\n

\u201cWe spend more money on higher education than any other country, and yet they’re turning our students into communists and terrorists and sympathizers of many, many different dimensions, Trump stated in a video announcing his idea.<\/p>\n

A senior policy analyst at the Tax Foundation suggested looking into how \u201ctax-exempt institutions are taxed more broadly\u201d rather than focusing on \u201cspecific sources of exempt income.\u201d<\/p>\n

\u201cOne concern related to taxing university endowments would be how that impacts a university\u2019s ability to provide financial aid to students or support education-related efforts more broadly,\u201d Garrett Watson told The Fix<\/em> via email. \u201cA counterargument is that this may not change university behavior significantly given that endowment taxes are often targeted at large endowments of universities who are well capitalized to address student needs.\u201d<\/p>\n

Changing the tax code broadly instead of just looking at university endowments \u201cwould be simpler and help bypass politically fraught issues surrounding the latter approach.\u201d<\/p>\n

The Fix<\/em> also reached out twice to Open the Books, the Heritage Foundation, the Brookings Institute, and the American Enterprise Institute for comment, but none responded.<\/p>\n

MORE:<\/strong> Tax universities to pay for student loan bailout, policy analyst argues<\/a><\/p>\n

IMAGE: CSPAN<\/p>\n

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