Republicans Craft Tax Hike for Harvard and Yale
11th March 2014
The tax increase is buried on page 879 of Rep. Dave Camp’s (R-Mich.) 979-page tax reform bill. The bill is considered unlikely to become law, but Camp is chairman of the powerful, tax-writing Ways and Means Committee, and his draft legislation is likely to provide a road map for tax reformers in years ahead.
The tax, as outlined in Section 5206 of the legislation, is called an “excise tax based on investment income of private colleges and universities.” It begins, “there is hereby imposed on each applicable institution for the taxable year an excise tax equal to 1 percent of the net investment income of such institution for the taxable year.”
The draft legislation goes on to make clear that the proposed new tax would apply only to private colleges and universities, not state colleges or universities. So Harvard’s $32 billion endowment would be fair game for the tax collector, but the University of Texas’s $20 billion endowment would remain tax exempt. The proposed tax would also only applies to the richest of the private colleges — those with endowments of at least $100,000 per full time student. That would exempt private colleges such as Georgetown or George Washington University, which are reportedly not as well endowed on a per student basis.
Even with those carve-outs, however, the tax adds up. The Joint Committee on Taxation estimates that the tax would raise $1.7 billion over the decade from 2014 to 2023. Harvard alone would pay roughly $30 million in tax for a single year in which a $30 billion endowment earned a ten percent return. Yale would pay a $20 million federal tax for a year in which its roughly $20 billion endowment earned a 10 percent return.
This is one of the more stupid ideas ever to come out of Congress. I guess, since Camp is from Michigan, he figures that if the Democrats can use the tax system to punish people they don’t like, then Republicans ought to be able to do likewise.
March 12th, 2014 at 09:18
Looks more to me like trade bait. Stick something obnoxious in a bill that the public won’t protest and the affected party (or their buddies) will have to do some negotiating to get it out.
March 13th, 2014 at 03:23
… which still represents a failure in the system, and a disappointing willingness on the part of Republicans to play the game rather than change the game.