Higher Education Watch
How Much Should the Government Subsidize Harvard?

Donald Trump made headlines a few weeks ago by suggesting on Twitter that the federal government should cut off funding to UC Berkeley as a result of the Milo incident. While this provocation was characteristically hyperbolic (probably intentionally so) a growing number of serious thinkers really are considering ways that the government might substantially restrict the flow of subsidies to selective American universities whose priorities aren’t necessarily in line with the public’s. Former Bush administration official Mark Schneider and policy researcher Jorge Klor de Alva make a coherent case for this in the Washington Post:

Taxpayers, for the most part, unknowingly support private institutions primarily through tax deductions and exemptions. For example, gifts to university endowments are tax deductible and the earnings on these endowments are exempt from taxation, as are the endowments themselves. For elite private institutions, those with endowments in the billions of dollars, the size of these tax breaks can dwarf the direct subsidies that taxpayers send to public institutions.

These tax breaks are rarely debated because they are hidden in the tax code. Meanwhile affluent private universities, claiming their importance to the realization of the American dream, do everything in their power to silence any questioning of their right to enrich themselves through favorable tax treatment. However, it is important to remember that these tax breaks are not divinely ordained. Rather, they flow from congressional acts aimed at improving the public welfare. Without doubt, America’s richest universities use their wealth to provide important benefits to society, such as support for research and student financial aid. But their inherent exclusivity leads them to fail at fostering the most critical dimension of the American dream: social mobility. And that should lead Congress to ask whether the extent of the tax subsidies granted to the nation’s wealthiest universities is justified.

There are indications that policymakers and voters might be drawn to some of these ideas. Connecticut’s Democratic legislature recently mulled the tax-exempt status of Yale’s $23 billion dollar endowment. Residents of Princeton, New Jersey filed a lawsuit (settled in the fall) to force their local university to pay property taxes. And Congressional Republicans have been scrutinizing the way well-endowed colleges spend their tax-subsidized war chests.

Academia likes to think of itself as an independent enclave and that any government pressure to change its ways (unless it is in service of leftwing ideological goals in areas like Title IX or affirmative action) amounts to an attack on the integrity of higher education. And while universities should be afforded broad latitude to govern themselves, it’s important for academic leaders to remember the extent to which they are reliant on a massive network of government subsidies—both in the form of explicit grants and carveouts woven into the tax code—and that the political basis for their privileged position is looking more tenuous by the day.

So the way for elite universities to fend off austerity is not to simply accuse everyone who questions their performance as anti-intellectual or simply ignorant of their greatness. Rather, it is for these universities to reinvigorate the public mission that won them such lavish treatment in the first place: Invest more in their local communities; increase their class sizes; make more scholarship and courses available to the public; spend more time on scholarship relevant to Americans, rather than promoting boutique ideological fetishes. If they don’t, Schneider and de Alva’s point of view is likely to simply grow more compelling over time.

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