GOP tax plan calls for levy on endowment-rich universities, colleges

College Hall on the University of Pennsylvania campus. (Emma Lee/WHYY)

College Hall on the University of Pennsylvania campus. (Emma Lee/WHYY)

Congressional Republicans’ preliminary plan to overhaul the tax code delivers on long-promised tax cuts for businesses, but one of the revenue drivers in the bill would levy a new tax on many private colleges and universities in the Philadelphia region.

Representatives of affected colleges and universities say this would dampen their ability to provide financial aid.

“For most institutions, the money for their endowment is dedicated to student aid,” said Matt Hamill, senior vice president for advocacy, research and communications for the National Association of College and University Business Officers. “So if more of this money is going to the federal treasury, there will be fewer dollars for student aid and fewer dollars to help people afford the cost of their education.”

Republicans — including President Donald Trump —  have criticized the nation’s wealthiest universities for accruing billions of dollars while avoiding most taxes due to their nonprofit status, even as college costs rise for most students.

More than 20 schools in Pennsylvania, New Jersey, and Delaware would feel the effects of the proposed tax, which would take 1.4 percent of all revenue from endowment investment income for schools with at least the equivalent of $100,000 in endowment per full-time student, according to numbers provided by National Association of College and University Business Officers.

In Pennsylvania, that includes:

  • Swarthmore College
  • Haverford College
  • Bryn Mawr College
  • Lafayette College
  • The University of Pennsylvania
  • Thomas Jefferson University
  • Bucknell University
  • Lehigh University
  • Dickinson College
  • Franklin and Marshall College
  • Washington and Jefferson College
  • Lycoming College
  • Gettysburg College
  • Muhlenburg University
  • Carnegie Mellon University
  • Westminster College
  • Philadelphia College of Osteopathic Medicine

In New Jersey, it would affect Princeton University, Princeton Theological Seminary, and Drew University — as well as Goldey-Beacom College in Wilmington, Delaware.

Smaller institutions with 500 or fewer students are exempt.

Bills on institutions on the lower end of the taxable range may be modest, but critics of the proposal say that revenue will need to be recouped from fundraising or lead to fewer scholarships.

In the Philadelphia region, the University of Pennsylvania — with a more than $9 billion endowment — and Princeton University — with a more than $20 billion endowment — stand to lose the most. Those numbers are as of fiscal year 2014.

“Princeton uses its endowment earnings to cover more than half of its budget each year,” said university Vice President Bob Durkee, noting that 60 percent of that university’s students receive financial aid.

He said the tax undoes a fundamental principal of American education — that schools should focus all of their earnings on teaching and research. “This proposal would overturn that time-tested policy solely to add revenues to the federal treasury,” Durkee said.

The University of Pennsylvania was more circumspect.

“We are aware of the proposal, and, at this point, we await further discussion in Congress,” said spokesman Ron Ozio.

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