Re: The Drum Beats Louder

Nathaniel, I’m not so sure about your post on college endowments . Maybe it’s just because I’m dull (a thesis, admittedly, that has floated about this office on more than one occasion), but the questions whose answers you think should be “obvious” seem legitimate to me. You concluded with this:

As I suspected when I first began following this story, the fight over endowments is, at its heart, a fight over private property. It brings up questions whose answers should be obvious. Of course the money that the taxpayer has earned is his own. Of course private institutions have the right to reap the benefits of sound investing, even if they do so better than others. And of course Americans have the right to give their money to private institutions that they think will educate the country’s best and brightest. This should all be common sense, but, of course, it is not. And so the drum beats on.

Sure. But the questions here don’t seem to have to deal with “rights.” The question has more to do with regulation, public policy, and how our political community wants to shape its tax policies to promote higher education. Currently, the donation you make your alma mater is tax deductible. And the interest income that your alma mater earns on its endowment investments is also tax free. These are tax breaks that individuals who spend their money otherwise and institutions dedicated to other ends do not enjoy. They exist because our political community has decided to assist non-profits, particularly academic non-profits, through beneficial tax schemes. But there’s no reason to think that the current tax scheme is best, especially if the political community decides that the goods it had hoped to serve in the first place are no longer being served. So, if Congress decides that institutions of higher learning that make over a certain amount of money a year in donations or interest earnings need to pay tax on them, I don’t see why that is wrong in any “obvious” sense. If congress decides that the tax-monies they collect from the colleges bringing in the largest donations will be used to help other schools—in order to best serve (as Congress sees it) the common good of a more widely educated public—then, again, the problem doesn’t seem “obvious.” If Congress decides that any institution that accepts the tax breaks has to play by Congress’ rules, again, I don’t see how “rights” to “private property” are “obviously” violated. I’m not saying I’d necessarily agree with these changes, just that they’re legitimate questions to be asking.

The supreme irony, of course, is that we’re talking about redistributive taxation: eliminating the tax breaks for the rich colleges and transferring some of their money to the poor schools. When it comes to redistributive taxation of wealthy businessmen, corporations, and Wall Street banks, the elites at Harvard and Yale seem more than pleased. But when it comes to redistributive taxation of Harvard and Yale, they suddenly become the functional equivalent of supply-siders. We’re also talking about welfare—white-collar welfare. Conservatives typically oppose welfare, but when it comes to helping their alma maters, they suddenly develop bleeding hearts. Why shouldn’t Harvard and Yale pay taxes on their endowment income? And if Harvard and Yale continue to get tax breaks, then why shouldn’t Congress be able to regulate how they use that money? The answers to these questions seem anything but “obvious.”