Some universities have multi-billion-dollar endowments. Ought to they be taxed? I’m no tax skilled, however I’ve lengthy been involved that the case for taxing endowments seems to be a bit just like the case for taxing wealth typically. But some conservatives assist the previous whereas opposing the latter.
In 2017, as a part of the Tax Cuts and Jobs Act, Congress imposed a 1.4 % tax on the web funding earnings of huge, well-endowed universities. The query now’s whether or not it must be expanded.
My colleague Erik Jensen is aware of way more about tax regulation than I do, and he had a piece this week in Civitas Outlook suggesting why taxes on college endowments isn’t such an amazing thought. Not solely does the tax increase minimal income, it induces universities to waste more cash on accountants and directors to account for and keep away from the tax (and its “cliff impact”), and its prices should not in the end borne by universities as establishments.
In type, schools pay the tax, simply as firms pay the company earnings tax. However everybody besides Bernie Sanders is aware of that the financial burden of company tax is borne by some mixture of buyers, workers, and clients—not the focused firms, that are authorized fictions. Economist Douglas Holtz-Eakin has equally argued that “within the near-term, the scholars and college workers will bear the brunt of the [endowment] tax.” Is that fascinating?
Jensen additionally means that if the aim of the tax is to penalize universities for being too progressive or “woke,” that may be a misguided justification for the coverage.
I defer to nobody in my dislike of wokeness, nevertheless it’s a foul thought to have the federal authorities attacking academic establishments for allowing disfavored views. If a university is nothing however a platform for political indoctrination, problem its tax-exempt standing. However regardless of what you might have learn, no elite college is tainted with wokeness from prime to backside. Sure, even departments within the arduous sciences and engineering have overdone wokeness in hiring and promotions, nevertheless it’s arduous to see how a course in physics or a analysis lab goes to be excessively woke.
In any occasion, the concept an establishment must be taxed as a result of politicians suppose it is too woke ought to make all who care about educational freedom nervous. (We must be equally nervous about any proposed federal mandates requiring wokeness.) I will go away to First Modification students the query of whether or not an anti-wokeness motivation for a tax violates the Structure. However, even when constitutional, it is not one thing Congress ought to do.
