Tuesday, December 26, 2017

The Sneaky Way Trump is Putting a Tax on Elitist Colleges

President Trump is really going after those who do not support him. The big one is the cap on the deduction for SALT that will largely affect the anti-Trump blue states. But Trump has also slapped a new tax on the elitist colleges that do not support him.

Greg Mankiw has the details:
The tax legislation approved this week by Congress is a mixed bag. It combines some badly needed reforms with various messy provisions seemingly designed to keep accountants and tax lawyers fully employed. But the part of the bill that most disappoints me is a small, simple change in policy: a new tax on large university endowments.

True, I am not completely objective here. I have spent the past 40 years of my life at three of the targeted institutions, as an undergraduate at Princeton, graduate student at the Massachusetts Institute of Technology, and faculty member at Harvard.

And the tax is not huge. It is a mere 1.4 percent of investment income and is expected to raise only $1.8 billion over 10 years. Because it applies only to universities with endowments of more than $500,000 per student, just a few dozen schools are affected.

But this new tax is not trivial. Take Princeton. It has an endowment of $24 billion. If it earns a 10 percent return, the annual cost of the tax will be roughly $34 million, more than $4,000 per student (including both undergraduate and graduate students).

I try to see both sides of an argument, but it is hard to justify this policy. It seems inconsistent with the stated objectives of Republican leaders.

I am against all tax increases, including this one. As I have pointed out Trump tax reform is to a significant degree just a shift of the tax burden on to those who do not support him. He is not shrinking government at all. He is introducing a new level of banana republic takings by cronies close to him and punishment of those who do not support him. What a bastard.



  1. Without warning or a phase in period, equity loan interest to pay for college is no longer deductible. That will make Trump very popular next fall in the suburbs.

  2. "He is introducing a new level of banana republic takings by cronies close to him and punishment of those who do not support him. What a bastard."

    This is business as usual.

  3. Princeton's endowment is $2.7 million per student. That's a fact he could have inserted. https://www.collegeraptor.com/college-rankings/details/EndowmentPerStudent Colleges are not really non-profit institutions- they just internalize the profits. They should be taxed like for-profit corporations.

    1. Taxation is theft. Govt is a criminal enterprise that should be recognized for what it is, instead of placing it at a morally advantaged "superior" position from where it can levy taxes on its victims.

    2. Stronginva, if you want to level the playing field, for-profit corporations should be taxed like endowments/non-profit institutions.

  4. You always say you are for every tax reduction. Does that include tax reductions that only increase govt borrowing? If not how do you propose politicians cut spending in a democracy where the public votes for its own benefits. Any one politician can go against spending, but he will not be reelected. What could anyone do to reduce spending?

  5. ALL of the people who complain about taxes directed against them are perfectly fine with the concept of taxation as a tool of social engineering. NOBODY can support the notion that taxes should be indirect and levied in amounts no larger than a government needs to manage basic public functions. And so we have a mess that will never go away.