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The Limited Value of Taxing University Endowments

"Stanford University" by Jeff Pence liscensed under CC BY 2.0 (via Flickr)

Last Thursday, Senate Republicans released their tax overhaul plan that they believe will create a simpler and fairer tax system. The proposed plan caused an unsettling amount of worry for some academic institutions because of a certain endowment tax included in the tax reform. This 1.4 percent tax on investment income will affect private universities and colleges with over 500 students and endowment assets of over $100,000 per student. It will not include public institutions. What has spurred such a radical position on private institutions is the stereotype that these universities are “ivory towers” of tax havens. Unfortunately, this label may hold some truth, and a deeper analysis of the behaviors of well-endowed universities is necessary.

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