By Angela Morabito
Some of the country’s wealthiest colleges may face a 1% tax on the total value of their endowments under Sen. Tom Cotton’s proposed Ivory Tower Tax Act. The bill would use tax revenue obtained from schools that meet certain financial benchmarks to fund workforce readiness programs, including apprenticeships.
The bill applies only to private institutions without religious affiliations. Additionally, a private institution would not be taxed so long as its endowment per full-time equivalent student is less than $500,000.
Out of around 4,000 postsecondary institutions in the United States, only 36 have endowments valued at or above $2.5 billion, according to data from the National Center for Education Statistics. Of those, 15 are public and one, Notre Dame, is a religious institution, and therefore exempt from the tax.
Of the remaining 20 institutions, nine have endowments equal to at least half a million dollars per full-time equivalent student, according to the institution’s most recent enrollment data in the Integrated Postsecondary Education Data System. The schools that would likely be taxed under this bill are listed below in order of endowment size.
1. Harvard University
2. Yale University
3. Stanford University
4. Princeton University
5. Massachusetts Institute of Technology
6. Emory University
7. Cornell University
8. Rice University
9. Dartmouth University
Of the 8 Ivy League schools, only 5 have endowments of more than $500,000 per full-time equivalent student. Columbia University, Brown University, and the University of Pennsylvania all have enough students that their endowments per student come out to less than $500,000.
Private, secular institutions that want to dodge the tax would have to either enroll more students or spend more of their endowments.
Spending money from endowments is another goal of Cotton’s proposed legislation: The same colleges hit by the endowment tax would also be required to spend at least 5% of their endowments annually, or else incur a higher tax on whatever part of that 5% remains unspent.
Cotton estimates that the policy would raise around $2 billion annually for workforce readiness programs.
Originally published by Campus Reform. Republished with permission.
