Exclusively halls of Congress, a small army of lobbyists representing the nation’s Ivy League and the wealthiest private universities are calling on lawmakers to cut taxes on multibillion-dollar endowments.
Earlier this year, Harvard University President Lawrence Bacow personally met with lawmakers, including Senate Majority Leader Chuck Schumer, DN.Y., and members of the Massachusetts delegation, to to lobby against the excise tax.
Stanford University, the University of Pennsylvania and Cornell University also pushed lawmakers to reverse the 1.4% excise tax on investment returns in private college endowments passed by Congress in 2017. The excise tax, enacted as part of President Donald Trump’s Tax and Jobs Cuts Act, applies to endowment asset investment returns of $500,000 per full-time equivalent student at private colleges. The formula impacts more than 40 private universities across the country.
The massive accumulation of wealth by these elite colleges has not stopped schools from insisting on the demand for a special tax cut. A review of lobbying records shows that private colleges mobilized more than two dozen lobbyists to lobby policymakers to repeal the tax. Harvard University, for example, has a team of lobbyists, along with two other lobbyists commissioned by the law firm O’Neill, Athy & Casey, to work on the issue.
“Repealing the endowment tax would be an indirect giveaway to private equity and hedge fund billionaires who already exploit too many tax breaks,” said University of California sociology professor Charlie Eaton. Wednesday.
As Eaton notes in his book “Bankers in the Ivory Tower,” which studies the role of finance in higher education, money from elite university endowments is pooled into investment vehicles managed by funds. speculative and private capital. The arrangement means generally tax-efficient cash flow for Wall Street figures, whose children then attend colleges and universities subsidized by these endowments.
Universities have argued that endowments are critical to funding student aid programs and that any tax on returns from endowments negatively impacts their ability to provide support to low-income students.
In May, Bacow, in conversation with David Rubenstein, the billionaire co-founder of the Carlyle Group and now chairman of the board of trustees of the University of Chicago, at the Economic Club of Washington, D.C. – a private members-only venue, in which dues amount to at least $2,500 a year – the head of Harvard University has complained bitterly about the unfairness of the tax.
“I think it’s bad public policy. We’re a charitable institution,” said Bacow, who noted the tax meant Harvard University would pay more in federal taxes than many big corporations pay in taxes. The tax, he also argued, was designed by Republicans to punish Democratic-leaning institutions.
“The tax was constructed disproportionately to tax institutions in liberal states,” he said.
But the comments belie a push for tax justice that is growing across the country. Massachusetts politicians have repeatedly called for a tax on private university endowments, including a proposal by former Democratic gubernatorial candidate Jay Gonzalez, who called for a 1.6% tax to raise 1 billion dollars for K-12 education, public transportation and public higher education.
In Rhode Island this year, state lawmakers proposed endowment taxes at Brown University to fund K-12 public education. The money is designed to make up for the fact that land held by the university is exempt from local property taxes, depriving adjacent communities, many of them working class, of an adequate local school budget.
State lobbying records show that Brown University hired at least three lobbyists to oppose the endowment tax proposals.
Last week, Inside Higher Ed reported on emails from Suzanne Day, an inside lobbyist at Harvard, encouraging her colleagues to lobby Democratic lawmakers on the issue. Lobbyists had hoped to include a provision in President Joe Biden’s Build Back Better package last year that offsets the tax through payments made under institutional aid.
“I am writing to urge you to engage with Democratic senators and their allies to push for action on this in the ongoing FY22 reconciliation bill. We believe this is the ‘one of our best chances to improve this policy,’ Day wrote in the email.
An early draft of the bill contained the Harvard-backed provision, but the reconciliation package was discarded after objections were raised by Sen. Joe Manchin, DW.Va., and Sen. Kyrsten Sinema, D-Ariz.
Although the path through Build Back Better remains uncertain, members of Congress have other avenues through which to grant elite universities a tax cut. Rep. Brendan Boyle, D-Pa., a member of the influential Ways and Means Committee that oversees tax policy, has a separate bill to repeal the tax.
Harvard University lobbyists did not respond to a request for comment.