TAX BIG COLLEGES THAT WON’T TEACH
WE’RE marking the 100th anniversary of the Communist takeover of the Russian government and the 500th anniversary of the Protestant Revolution. I’m not trying to say they’re similar, except in one respect. In both cases, the new governments that followed got a financial rescue package by breaking up the monasteries and seizing church-owned property.
Nobody wants to do that, for any of America’s religious and cultural institutions. In particular, we have the world’s best colleges and universities, and we want them to flourish. At the same time, it’s time to take a look at how to treat them under US tax law.
Colleges are financed by student tuition, private donations, government grants and the money their endowments earn when they’re invested. None of that is taxable. However, the proposed Tax Cuts and Jobs Act introduced last week would tax investment earnings for higher-education institutions with at least 500 students and endowments exceeding $100,000 per full-time student.
The $100,000 cap would exclude some prominent, less well-endowed universities such as Georgetown and NYU, but catch the academic fat cats, such as Princeton (an endowment of $2.6 million per student), Yale ($1.9 million) and Harvard ($1.8 million). In 2015, Princeton salted away investment income of $2.5 billion, tax free, in addition to what it received in tuition, donations and government grants.
That $100,000 figure sends a message. If you have all that money, relative to the number of your students, are you really an educational institution?
When you look at the state of US higher education, that’s a fair question. How about the idiot courses that are often offered, such as Oberlin’s “How to Win a Beauty Contest,” Skidmore’s “The Sociology of Miley Cyrus” or “Zombies in Popular Media” at Columbia College at Chicago?
Instead of an education, what students are getting is a kind of vocational training, where the vocation is membership in the New Class of lawyers, government aides and staffers for multi-national corporations and NGOs. It’s not humanistic education so much as training in how clever barbarians can navigate cultural signifiers in order to produce a credentialized elite.
There’s another sense in which America’s colleges have forgotten their educational mission. Increasingly, they’re plantations run by non-academic bureaucrats — the diversity officers, the associate deans for planning, the blob that lacks the scholarship to teach but possesses the power to tell scholars what to do. They’re a dumping ground for teachers who flunked scholarship and ideologues who like to boss people around. The all-administrative university is a creature of federal funding of higher ed. Like us, other countries offer state-supported loans for university students. But unlike us, they required the universities to cap tuition as part of the bargain. We didn’t do so, and our private universities in turn took this as an excuse to run up the tab, increasing tuition fees far in excess of the rate of inflation.
The money didn’t go into better teaching or scholarship. Instead, it went into vice provosts, community engagement officers, “knowledge managers” and all-around administrative busybodies.
The Princetons, Yales and Harvards are the glories of US higher education, of course, but a tax on investment earnings isn’t going to impede their mission. Moreover, the list of super-wealthy colleges also includes the Oberlins that are resting on their endowments more than their laurels.
A college that lives off of its endowment needn’t care overmuch about what it teaches its students, which is one reason so many of them have turned themselves into political indoctrination factories.
The proposed new tax is minimal — just 1.4 percent on the college’s investment income. (Private foundations pay 2 percent.) But for America’s colleges it’s a wake-up call that Congress has them in their sights. After all, why 1.4 percent? Why not, say, the same rate that corporations pay, when what we’re taking about are business investments in both cases?