Congress is now considering two different tax reform bills, with pressure from the president to get a final version on his desk before year's end.
Universities and colleges are worried that both the House and Senate tax plans could threaten higher education. Of special concern: a proposed 1.4-percent excise tax on wealthy private college endowments.
Among the college leaders closely watching this tax plan is Jorge Gonzalez, president of Kalamazoo College. He joined Stateside today.
Listen to the full conversation above, or read some highlights below.
On how these endowments are structured
“Basically what happens is that you have friends of the college – most of the time they’re alumni, sometimes they’re members of the community – which strongly believe in what the college or the university does. And when they believe in this they say, ‘You know what, what I want to do is provide you resources so that forever you’ll be able to support this particular activity.'"
"And so some of them will give you money that you invest and you’re going to provide scholarships, or they provide money to support professors or they support research, or they support study abroad – a variety of things. But again, these are people that give you the money, that trust you with that money for you to do something good with the earnings."
On what the tax, in its proposed form, could mean for Kalamazoo College
“In this particular moment, and the version that… was approved by the House would not affect us, because what they’re saying is it 'only affects those colleges that have an endowment that is more than $250,000 per student.' We’re not quite there yet… however, this affects a number of universities. And more importantly, this opens the door for that threshold to continue to change over time. And eventually, it would tax our earnings.”
"It's baffling to me that in a time when we are in the era of the knowledge economy, Congress is trying to impose a tax on knowledge."
“...and that’s incredibly dangerous territory to step in. Because the result of this is that the revenues that we would receive for the endowment would be diminished, and as a result of that, our ability to provide access to high-quality education to students that cannot afford it would be diminished. And also, our ability to deliver first-rate education would be hindered by this, because we would have less revenue to be able to do all of the things that we want to do for our students.”
"And again, it is a very dangerous precedent. This is money that was given to the colleges by private donors because they want it to be used by the college to support our activities. And it was an understanding, as it's been for many, many years, that those earnings would be used 100 percent to support the college, and not a part of it going away to pay some tax that has never existed before."
"It's baffling to me that in a time when we are in the era of the knowledge economy, Congress is trying to impose a tax on knowledge."
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