Let's Consider Taxing Elite Colleges' Huge Endowments

As the student-loan struggle continues and presidential candidates try to come up with ways to help middle-class and disadvantaged students attend college, there are stockpiles of money that are benefiting the most affluent, unfettered by government taxation: the endowments of elite colleges, Jordan Weissmann writes for Slate. And that's something we should look more closely at, especially considering his conversation with Mark Schneider, an ex-Department of Education official who's co-authored a report on the subject for the Nexus Research and Policy Center think tank. "They're just collecting tons, and tons, and tons of money," Schneider says. "It's a web of hidden subsidies that need to be talked about and investigated so we can figure out whether this is a socially desirable system." In the report, the authors point out the wide gap between tax benefits for schools like Harvard—currently sitting pretty on a $36.4 billion endowment—and public funding received by state schools.

To wit: Of the 60 schools they examined, private schools with big endowments received an average of $41,000 per student in tax subsidies, while public flagship schools got $15,300 in direct funding, regional state schools received $6,700, and community colleges hovered at $5,100. But Weissmann points out there are issues with both the report and the concept, not least of which is the fact that Nexus Research is a group that's supported for-profit schools in the past (it was founded on funds from the University of Phoenix). Weissmann also brings up that the report doesn't count state schools' tax savings on their own endowments or from Pell Grant subsidies, and that taxing endowments could lead to questioning why those of nonprofits outside of higher ed (e.g., museums) also aren't taxed. Despite these concerns, Weissmann thinks the idea's worth exploring, noting, "I think we'd all like to spend a little less money sending other people's kids to Harvard." Read Weissmann's full column here. (More endowment stories.)