At least fi ve schools are expected


to be in the 21% tax bracket: Harvard, Yale, Princeton, Stanford, and the Massachusetts Institute of Technol- ogy, all of which have endowments of about $25 billion or more. The rate would also apply


to others with endowments of more than $2 million per U.S. student, potentially sweeping in other schools such as the California Institute of Tech- nology, with an endowment of $4.3 billion. The plan would tax the next


tier of schools — those with endowments between $1.25 million and $2 million per stu- dent — at 14%. Schools with endowments


between $750,000 and $1.25 million per student would be taxed at 7%.


Endowments valued at $750,000 or less per student would be taxed at the current 1.4%.


The bill generally exempts


public and religious schools. Whatever the rate, the prin- ciple behind the plan is that


many universities are rich enough that they no longer deserve to be treated diff erently. Endowments provide universities with far more of a steady income than most nonprofi ts receive, and yet they are given spe- cial treatment not avail- able to other charitable organizations. For example, they are


“College graduates generally earn more money than nongraduates, so essentially working-class, lower-income people subsidize wealthier, educated people through the tax code.”


A report from Rep. Jason Smith


of Missouri, chair of the House Ways and Means Committee, concludes that “woke, elite universities operate more like major corporations. They should be held accountable, ensur- ing they can no longer abuse gener- ous benefi ts provided through the tax code.” When he was a senator in 2019,


now Vice President JD Vance made a similar argument in proposing his College Endowment Accountabil- ity Act. Vance, a graduate of Yale Law


— Vice President JD Vance


School, has long pointed out that most Americans don’t graduate from college — only 37.7% hold a bachelor’s degree or higher. “College graduates generally earn


more money than nongraduates, so essentially working-class, lower- income people subsidize wealthier, educated people through the tax code,” he argued in 2019. Those Americans who do go to col-


lege have been the victims of price gouging through rising tuition that has gone up by 40 points higher than the overall infl ation rate for decades.


Colleges Need to Get Real R


ichard Vedder, a professor emeritus


at Athens University, is the author of an explosive new book, Let Colleges Fail: The Power of Creative Destruction in Higher Education. He points


exempt from a rule that they must spend at least 5% of their endowments to maintain their favor- able tax status. Many university endowment managers earn higher salaries than investment managers on Wall Street — for example, Harvard University’s top six endowment investment offi - cials earned a combined $26 million in 2023.


VEDDER


out that “nearly 40% of full-time four-year college students fail to graduate within six years” and “roughly the same proportion


of graduates are what the New York Federal Reserve Bank appropriately calls ‘underemployed’ — taking jobs not requiring college- level skills — for significant periods after graduation.” Students themselves


are increasingly disillusioned. Their


This has allowed


satisfaction with a college degree has plummeted over the past decade. In 2011, 86% of young people thought it was worth it, compared to only 42% in 2023. Vedder says university


budgets have costs per student far higher than in comparable industrial democracies like the U.K., Germany, and Canada. Such investment, mainly through burgeoning federal student loan programs, has made millions of Americans feel they will never escape that debt and start a family or buy a house. Many of the billions


poured into education have contributed to costly administrative bloat, especially in diversity, equity, and inclusion programs.


leading universities to pursue “woke” agendas that supplant or even stamp out an emphasis on job No. 1: the discovery and dissemination of useful knowledge and creative ideas. Vedder has a solution:


expose universities to some real-world market conditions. “The ‘creative


destruction’ working so well for American business holds promise in enacting reforms and being a useful teacher to improve our ailing universities,” he says. “A good start towards


that would be to send a message to American universities that the tax code will no longer treat them as a sacred cow. They have to start proving their product has more real-world benefits.”


JULY 2025 | NEWSMAX 15


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