Opinion: GOP tax bill represents a disconcerting raid on endowments


WASHINGTON — Such is the federal government’s sprawl, and its power to establish new governing precedents, mere Washington twitches can jeopardize venerable principles and institutions. This is illustrated by a seemingly small but actually momentous provision of the Republicans’ tax bill — a 1.4 percent excise tax on the endowment earnings of about 70 colleges and universities with the largest per student endowments. To raise less than $3 billion in a decade — less than 0.005 percent of projected federal spending of $53 trillion — Republicans would blur important distinctions and abandon their defining mission.

Private foundations, which are generally run by small coteries, pay a “supervisory tax” on investment income to defray the cost of IRS oversight to guarantee that their resources are used for charitable purposes. In 1984, however, Congress created a new entity, an “operating foundation.” Such organizations — e.g., often museums or libraries — are exempt from the tax on investment earnings because they apply their assets directly to their charitable activities rather than making grants to other organizations, as do foundations that therefore must pay the supervisory tax.

Most university endowments are compounds of thousands of individual funds that often are restricted to particular uses, all of which further the institutions’ educational purposes. Hence these endowments are akin to the untaxed “operating foundations.” Yet the Republicans would arbitrarily make university endowments uniquely subject to a tax not applied to similar entities.

Are Republicans aware, for example, that Princeton’s endowment earnings fund more than half its annual budget, and will support expansion of the student body? It also enables “need-blind” admissions: More than 60 percent of undergraduates receive financial assistance; those from families with incomes below $65,000 pay no tuition, room or board; those from families with incomes below $160,000 pay no tuition. No loans are required. Ph.D. candidates receive tuition and a stipend for living costs.

The world’s great research universities foster upward mobility that fulfils democratic aspirations and combats the stagnation of elites. It is astonishingly shortsighted to jeopardize all this.

Great universities are great because philanthropic generations have borne the cost of sustaining private institutions that seed the nation with excellence.

Its appetite whetted by 1.4 percent, the political class will not stop there. Once the understanding that until now has protected endowments is shredded, there will be no limiting principle to constrain governments — those of the states, too — in their unsleeping search for revenues to expand their power.

The public sector’s sprawl threatens to enfeeble the private institutions of civil society that mediate between the individual and the state and that leaven society with energy and creativity that government cannot supply. Time was, conservatism’s argument for limiting government was to defend these institutions from being starved of resources and functions by government. Abandonment of this argument is apparent in the vandalism that Republicans are mounting against universities’ endowments.

This raid against little platoons of independent excellence would be unsurprising were it proposed by progressives, who are ever eager to extend government’s reach and to break private institutions to the state’s saddle. Coming from Republicans, it is acutely discouraging.

Disclosure: Will is a former Princeton trustee.

Writes for The Washington Post.



Reader Comments ...


Next Up in Opinion

Letters to the editor: Nov. 24, 2017

Re: Nov. 15 article, “France terrorism survivor: EMDR therapy helped me, could help others.” Though I am extremely sorry for the horrible violence Maegan Copeland’s family experienced, I was thrilled to see the front-page article on Eye Movement Desensitization and Reprocessing. As an 18-year hospice chaplain with Hospice Austin,...
Herman: Ben Barnes, Greg Abbott and my new cemetery plot
Herman: Ben Barnes, Greg Abbott and my new cemetery plot

It’s the day after Thanksgiving. You know what that means. Even more football! And leftovers. So here are some things I’ve been meaning to tell you but haven’t had a chance. Here we go, reheated in the microwave for your edification. I recently ran into long-ago Lt. Gov. Ben Barnes at a surprise 75th birthday party for Kent Hance...
Opinion: Is America up for a second Cold War?

After the 19th national congress of the Chinese Communist Party in October, one may discern Premier Xi Jinping’s vision of the emerging New World Order. By 2049, the centennial of the triumph of Communist Revolution, China shall have become the first power on earth. Her occupation and humiliation by the West and Japan in the 19th and 20th centuries...
Texas can, should do better for state living center residents
Texas can, should do better for state living center residents

Liz Belile visits her sister Shanna in the Austin State Supported Living Center in West Austin Monday October 30, 2017. Belile’s sister suffers from a seizure disorder and needs permanent care, but having her in Austin has provided her with the opportunity to look in on her regularly and tend to her other needs....
With ‘Spineless,’ Austin author explores both her past and jellyfish
With ‘Spineless,’ Austin author explores both her past and jellyfish

Consider, if you will, the humble jellyfish. It’s a creature both 95 percent water and often possessed of one of the planet’s deadliest venoms. A creature that has existed in its current form, more or less, for millions of years, yet is one of the planet’s most delicate. In some languages, jellyfish translates as “living water&rdquo...
More Stories