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Corporate welfare is no good for corporations or for colleges

November 22, 2019

This piece represents the opinion of the author.
Kyra Tan

I’d like to comment on last week’s Orient article about taxes on college endowments. Wealthy non-profit colleges should not oppose efforts to collect taxes on their enormous endowment funds. Colleges like to brag that they encourage critical thinking. When I apply critical thinking to college finances, it looks to me as though non-profit tax exemptions for schools with billion-dollar endowments are just another form of corporate welfare.

Colleges claim that they need their tax exemptions so they can help society. Critically thinking, there are at least four problems with this argument. First, can’t colleges and universities help our government pay for social programs the way the rest of us do? Social science departments in colleges have designed most of our government programs. Faculty experts lobby to begin and then protect social programs. Colleges should put their money where their social science departments are and help pay for what they want the government to do.

Second, if wealthy colleges deserve tax-exempt privileges, then there are many equally or more deserving organizations who should qualify for tax exemptions. Wal-Mart helps millions of low-income families stretch their resources with low priced goods. A car wash that employs four men with autism is as deserving of a tax exemption as a non-profit college.

Third, by what logic do we use tax benefits to help any organization that has a narrow gate for admission and only lets in the most talented in our society? Critical thinking would make us ask if organizations with narrow admission for talented people in academics or sports should receive non-profit status. The National Football League or Major League Baseball could make a similar bid for tax exemption because they screen for exceptional talent and then they help the exceptionally talented improve their skills and contributions to society. Helping needy students with a lot of talent is a high-minded endeavor, but motivated students do pretty well regardless of what college they attend. Society’s most difficult problems require us to help the needy with the least amount of talent more than those who are deciding between Harvard and Ohio State. A disadvantaged genius who attends Penn State will do well enough with the Penn State education. It’s the needy who are homeless or jobless or dropping out of school or trapped in dysfunctional pre-crime careers who require more attention and resources.

Fourth, selective colleges end up receiving hundreds of millions of dollars in tuition fees and fund-raising support from our wealthiest and most talented citizens because those are the people who receive concentrated benefits from colleges. With the support of America’s wealthiest families, colleges do not need the extra help of tax exemption.

Colleges have to watch out for the bureaucratic trap that has them speaking one way, and acting in another way. If they are for the public good, then they should help with public expenses just as Wal-Mart and the local car wash do. Wal-Mart keeps prices down. Colleges have allowed costs to soar more than double the rate of the Consumer Price Index in the past 20 years. Colleges could try to hold down costs, but they have discovered that no matter how much they raise prices, customers still line up to attend Yale and Princeton. So they raise prices and build ever more luxurious facilities for sports, housing, dining and classrooms. They do not need to keep costs low. They also do not need tax exemptions.

I suspect another subtle but diabolical problem with tax exemption for colleges. Colleges siphon off millions of dollars of charitable giving with the most amazing fund-raising campaigns. They vacuum up charitable giving dollars that might otherwise be donated to soup kitchens, Boys’ & Girls’ Clubs, homeless shelters, hospitals and wildlife habitat preservation. No other type of tax-exempt organization is able to match the Madison Avenue caliber fundraising power of colleges. They are charitable fundraising juggernauts. A critically minded evaluation of what colleges do could conclude that they do not do the kind of charity that needs as much tax-exempt support as organizations in the trenches of anti-poverty and anti-crime programs. Let colleges build ever more impressive buildings, charge ever-higher prices for tuition, and let them also pay taxes on behemoth endowments. Critical thinking would persuade them to pay taxes and give up some of the corporate welfare we like, but do not need.

Peter Slovenski is the Director of Track & Field at Bowdoin.

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4 comments:

  1. Alex Linhart '06 says:

    Very interesting piece with some super solid arguments

  2. Jack ‘19 says:

    Very interesting article… wonder if schools could get tax exemptions if they use a certain portion of their endowment to fund financial aid? Thereby providing access for students who wouldn’t otherwise have the resources to attend college?

  3. Bill Callahan '92 says:

    Nice letter, Coach Slovenski. I agree with your conclusion if not all the supporting arguments.

  4. James '78 says:

    One of the many weaknesses in this article is the fact that MANY major US Corporations do not pay ANY taxes on their profits, and private, non-profit colleges and untiversities do not make profits. Endowment gains are very different from profits, but to call the non-profit exemption “corporate welfare” is very far off the mark, IMHO.


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