Thursday, June 5, 2008

More Angst Re College Endowments: Waldeck on Limiting Deductions for Gifts to Very Wealthy Universities

Speaking of huge untapped endowments, over on TaxProf Paul Caron reports that Sarah Waldeck (Seton Hall) has posted The Coming Showdown Over University Endowments: Enlisting the Donors, 77 Fordham L. Rev. ___ (2009), on SSRN.  Here is the abstract:

This essay focuses on the discordance between universities with endowments in excess of one billion dollars and what is occurring in the rest of higher education, particularly with respect to skyrocketing tuition and a growing institutional wealth gap. The essay analyzes absolute endowment values, the amount of endowment per student, and expense-endowment ratios at 60 private universities. It concludes that a small number of schools have an excess endowment, and then provides a convenient proxy for determining when an endowment is so large that it should receive less-preferential tax treatment. The essay then considers the effects that large endowments have at their home institutions and throughout higher education, the arguments in defense of large endowments, and some frequently-proposed modifications to the tax code. The essay recommends that policymakers modify the charitable deduction for gifts to universities with mega-endowments, as part of a multi-faceted effort to spur endowment spending and control tuition.

The redistributive idea of drying up donations to universities with "excess endowments" (by reducing or removing the tax subsidy for the very wealthy, apparently) is provocative, to say the least.  I suspect Waldeck's piece will be one of the more frequently downloaded papers (at least amongst nonprofit and higher ed scholars) over the next few months.


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