The Case for Taxing College Endowments

Richard Vedder and Justin Strehle:

Republicans inserted many provisions in their House and Senate tax reform bills that have inflamed the higher education establishment, including a proposed excise tax on endowments exceeding $250,000 per student at private schools. Although only about 70 schools are affected that collectively enroll under 10 percent of the students attending four-year American universities, from some rhetoric of university leaders you would think that the very foundation of American higher education has been dramatically impaired.

Now Universities Have Detractors

There are two good reasons why the endowment tax makes sense to some politicians. First, public attitudes toward universities have distinctly soured in recent years. What the public perceives as outrageous student behavior, feckless university leadership, and excessive tuition fees has combined with a growing hostility by Republican lawmakers angered over the large political donations and public criticism that academics have made attempting to oust them from office. Lawmakers are growing tired of feeding the mouths that bite them. Revenues raised by taxing colleges can modestly help fund other tax reductions that lawmakers want to make, which are probably economically beneficial to the well over 90 percent of the population living outside the Ivory Towers of Academia.