Chronicle of Higher Education Op-Ed:  A Damaging Endowment Tax Crosses the Finish Line, by Phillip Levine (Wellesley):

t’s finally over. I’ve been tracking the estimated impact of various endowment-tax proposals at leading colleges and universities for the past six months, and the scorecard is now complete. The damage isn’t as severe as it could have been, but there will be pain. Mostly what we observed was the triumph of politics.

Highly endowed private colleges have been in the crosshairs for the past decade. A tax on their investment returns was first instituted in 2017 as part of the Tax Cuts and Jobs Act. That law imposed a tax of 1.4 percent on returns for institutions with more than 500 tuition-paying students and a per-capita endowment of greater than $500,000.

In one of my earlier analyses for The Chronicle, I estimated the annual cost that would be imposed on selected highly endowed colleges and universities under three different sets of proposals: an initial House proposal from January, an initial House-passed bill from April, and an initial Senate proposal from June. Now, in a table below, I show those estimates and also my latest projections based on the final bill.

These institutions are among the best in the world. They provide a high-quality education to their students, who go on to become society’s leaders. They generate advances in science and technology that improve our economy and our health. The financial hit they face will impose real costs on the people who work at these colleges, the students who attend them, the communities they are in, and our country as a whole. Does scoring a few political points warrant the infliction of such pain and the squandering of such opportunity for our nation? Evidently, this administration thinks so.

Chronicle of Higher Education, The Nation’s Wealthiest Small Colleges Just Won a Big Tax Exemption:

“I can’t even tell you the pendulum swing of all this,” said Anne F. Harris, president of Grinnell College, in Iowa. Grinnell went from paying $2.4 million under the current tax, to potentially $30 million under the initial bill that passed the House of Representatives, to now being exempt altogether. Its endowment was valued at $2.67 billion as of last year.

The tax break is a huge win for Grinnell and the 20 or so small liberal-arts colleges that banded together in a joint lobbying effort — making the case to lawmakers that their endowment returns are critical to fund their financial-aid programs, cover operational costs, and contribute to their communities.

The colleges that joined together are in similar situations: Their financial models rely on endowment interest, and many are located in rural communities. Eleven of the 14 colleges that would have been subject to the top three endowment-tax rates under the House bill — 7, 14, and 21 percent — enlisted lobbying and consulting firms in recent weeks, according to disclosure records.

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