Re: The Drum Beats Louder

Ryan, you’re certainly right about one thing, namely my misuse of the term “rights.” I don’t actually believe that we have a right, under natural or constitutional law, to receive tax breaks for donations to non-profit organizations. My primary assertion was that the endowment debate is, at its core, a debate over private property—as Rep. Tierney demonstrated when he implied that what the tax payer donates to a non-profit is not his, but a gift from the government that refrains from taxing it.

You and I both agree that individuals have a right to private property. And, I think we also have to agree, private property belongs to institutions in the same way that it belongs to individuals.

Now, what happens if an individual gives money to an institution? Surely it belongs to that institution in the same way that it belonged to him. And if he gives more because he receives a tax break from the government, how can the government claim that some of that money was theirs, that they are somehow donating it to the institution? The government may have encouraged the donation, but it has no claim of ownership over that donation. With or without tax-based incentives, the property rests in the hands of those exchanging it.

That’s my answer to the question of private property: Money donated to a university belongs to that university, no matter how much money that university ends up with. I think it’s your answer, too—just as we can agree that if Congress decides to tax non-profits the way it taxes for-profit corporations, that is not a violation of any natural or constitutional rights.

Our real disagreement, Ryan, begins here: You think higher taxation on non-profits might be a good idea. But the debate isn’t whether Harvard and Yale are or are not acting the way non-profits should. Everyone agrees that educational institutions should continue to receive tax breaks for the work they do. The debate is over what to do now—when a few universities have a lot more money than the other non-profit universities with which they compete.

At its core, this is all about the envy of wealth. No one is asking whether it’s okay for a university to have an endowment. But some people see schools with large endowments, and that makes them mad. Are we supposed to suspend the principles behind non-profit taxation because of straightforward resentment?

We saw this line of thinking yesterday on the Chronicle of Higher Education’s website . The top Republican on the House Education Committee, Buck McKeon of California, said “that he did support the principle of requiring colleges to spend more of their endowment assets. But the rule should apply only to the wealthiest institutions.”

Some of this talk this talk against schools with large endowments demonstrates a valid concern with rising tuitions. Many wonder whether rich universities are hoarding their wealth like for-profit enterprises or using it for their non-profit educational activities, like the lowering of tuition. The short answer to that is that schools are doing this, and that the budgets of private colleges are not under the management of any Congressional committee.

Rep. Tierney is definitely wrong when he says that part of Harvard and Yale’s money from private donations really belongs to the state. Should we rework the non-profit status for some institutions just because they managed their money well—money that will allow them to continue their approved, non-profit mission? That would be equally wrong, and an equally bad idea.