Some universities have multi-billion-dollar endowments. Should they be taxed? I am no tax expert, but I have long been concerned that the case for taxing endowments looks a bit like the case for taxing wealth generally. Yet some conservatives support the former while opposing the latter.
In 2017, as part of the Tax Cuts and Jobs Act, Congress imposed a 1.4 percent tax on the net investment income of large, well-endowed universities. The question now is whether it should be expanded.
My colleague Erik Jensen knows far more about tax law than I do, and he had a piece this week in Civitas Outlook suggesting why taxes on university endowments is not such a great idea. Not only does the tax raise minimal revenue, it induces universities to waste more money on accountants and administrators to account for and avoid the tax (and its "cliff effect"), and its costs are not ultimately borne by universities as institutions.
