Private Colleges Suggest Alternative Endowment Tax

For weeks, private colleges big and small have been saying that Republicans’ plan to increase the endowment tax rate to up to 21 percent will hurt institutional aid programs and low-income students. Now some of those colleges are unveiling alternative proposals for what Congress should do instead.

About two dozen of the country’s largest and wealthiest research institutions are pledging to spend more of their endowment revenue each year on student aid and teaching in the hopes that it will convince conservative lawmakers not to increase the tax rate, The Wall Street Journal reported.

“What I hear from Republican members of Congress is a desire to ensure that colleges are using their charitable endowments to support today’s students and researchers rather than saving too much for the future,” Princeton president Christopher Eisgruber told the Journal. “Those are valid concerns, and this proposal directly addresses them.”

Smaller liberal arts colleges want Congress to adjust the tax levels based on the number of students enrolled, Politico reported in its education newsletter. Currently the maximum proposed tax could apply to any college with 500 students or more. A coalition of 24 small colleges suggest lawmakers raise the head count to 5,000.

Others have proposed revisions that would determine tax rates according to how much endowment revenue each college puts toward scholarships each year, and some say religiously affiliated institutions should be exempt.

Nearly all institutions would prefer the tax rate to remain flat at 1.4 percent, which has been the case since President Donald Trump’s first round of tax policies was passed in 2017. But they would likely consider any plan that scraps the 21 percent tax rate a win, since the House’s current proposal could cost colleges hundreds of millions of dollars each year.