A "2% excise tax on some colleges' endowment income" is being considered as one of the ways to 'pay for' lower corporate and individual tax rates as part of tax reform, Colleen Murphy, who covers taxes for Bloomberg BNA, reports on Twitter.
This is in line with the "Republicans for Higher Taxes" theme I wrote about here a few days ago. It also raises a few questions, even beyond the "why are Republicans trying to come up with ways to raise taxes?" question I raised earlier. Why just "some" colleges but not all colleges? Past proposals along these lines have targeted colleges with endowments above a certain level, either per student or overall, a kind of redistributive or "soak the rich" approach. Others have targeted private colleges and universities but not those operated by state governments. If college endowment income is going to be subject to that tax, why go after just colleges rather than also foundations, like Ford or Soros or Gates/Buffett? The foundations, like the colleges, trend politically liberal, with some notable exceptions.
So much college and university money already comes from the government — research funding grants, Medicare and Medicaid money to medical school teaching hospitals, federally subsidized student loans and Pell Grants — that any money government raises by this tax will probably wind up just making a roundtrip out the door back to the universities. The universities will argue, with some merit, that they are such economic growth engines (Silicon Valley/Stanford; MIT-Harvard/Cambridge-Rt. 128) that Washington should be trying to figure out ways to help them more, not figure out ways to tax them more. In a way, by going after colleges with big endowments, Republicans would doing what Democrats do when they try to raise taxes on rich individuals or companies — punishing success or reducing inequality or taking aim at their political opponents or going where the money is, or all of those things, depending on how you look at it.
To be clear, I'm not here taking a position for or against this tax. I'm just flagging it as newsworthy and exploring some of the issues involved.
