Yale News quoted Dr. Richard Vedder, Distinguished Professor Emeritus of Economics at Ohio University and Director of the Center for College Affordability and Productivity, in a Nov. 1 story headlined “Experts debate endowment.”
As Republicans in the U.S. House of Representatives weigh the final details of a tax cut plan, some experts have called into question the wisdom of maintaining tax exemptions on multibillion-dollar university endowments.
Although there is no indication that the upcoming congressional tax plan will address university endowments, in the past, politicians from both parties have proposed partially removing tax exemptions on donations to university endowments. The issue came into the spotlight recently when Connecticut legislators considered imposing a tax on Yale’s endowment in March 2016. That proposal lost momentum due to a lack of support within the state legislature.
Experts interviewed expressed mixed opinions on whether university endowments should remain tax-exempt.
Dr. Richard Vedder
“[Tax subsidies for university endowments] are becoming increasingly questionable, particularly when tax subsidies amount to huge transfers from the general taxpaying public to elite endowments,” Director of the Center for College Affordability and Productivity Richard Vedder said. “It’s not serving taxpayers’ interests.”
Vedder, an economics professor at Ohio University, said that 25 years ago, providing tax subsidies for endowments made sense because, at that point, the subsidies allowed more students to attend private universities. Now, with some university endowments closing in on $2 million per student, Vedder said tax exemptions no longer serve the public good.
He said he sees an incongruence between taxing donations to build houses for poor people and not taxing donations that go toward building “Harry Potter-like” dorms for 20-year-olds.
“I’m all for it, but I don’t want my dollars to be used to pay for it as a taxpayer,” Vedder said.
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