New study recommends tax on endowments

More than 800 colleges and universities across North America hold endowment assets of US$516 billion. But the top 10 schools in terms of assets have about US$180 billion of that total, more than one-third of all the holdings. None of that money, nor the gains on it, are taxed, writes Jeffrey J Selingo for The Washington Post.

As non-profit entities, neither are the extensive land holdings of the nation’s colleges and universities. Such benefits account for US$41,000 in hidden taxpayer subsidies per student annually, on average, at the top 10 wealthiest private universities. That’s more than three times the direct appropriations public universities in the same states as those schools get.

Those figures come from a new study released last Monday, which recommends an excise tax on private colleges’ endowments of more than US$500 million. Such a tax, which would not impact individual gifts to the institutions and would be reduced by the amount the schools dedicate to financial assistance, could generate US$6 billion for the federal government to use for President Barack Obama’s free community college proposal.

“The inequality of the distribution of this is the most troublesome,” said Mark Schneider, one of the co-authors of the study, who is a vice-president at the American Institutes for Research, and a former US commissioner of education statistics. “What is the public purpose of a school that educates wealthy people and foreign students?”
Full report on The Washington Post site