Hillsdale College should be worried about the Republicans’ tax reform plan.
Although many conservatives celebrated the passage of the bill through the Senate Budget Committee, they ought to oppose the bill’s introduction of a university endowment tax.
If passed by Congress, this bill would impose a 1.4 percent tax on the investment incomes of universities with endowments at or above $250,000 per student. According to reports, this new tax would affect about 70 institutions — including Hillsdale College.
Our endowment is about $540 million, and there are roughly 1500 students enrolled here. That means there is about $360,000 in the endowment for every student, qualifying Hillsdale for this new tax.
The U.S. tax code is overcomplicated and desperately in need of reform. Many measures in the Republican plan deserve support, such as cutting corporate taxes and reducing the number of tax brackets, but the proposed endowment tax is not such a measure.
Republicans intend this new tax to help pay for the tax-reform package. University endowments are a convenient target for new taxes, because the Republican base views the academy as one of their great adversaries in the culture wars.
R.R. Reno, the editor of “First Things,” defended this new tax as a weapon for the culture war. He thinks that it should be even higher.
“Cultural power has become concentrated in a narrower and narrower class of people, and the institutions that serve (and perpetuate) them have become arrogant and detached,” he wrote online earlier this month.
According to Reno, many of the problems in the country can be traced to a dereliction of duty by the academy. Tenured radicals and socialist professors corrupt the youth, Reno argued, and therefore deserve this tax as a punishment.
“Taxes have consequences. Raise taxes on something, and you’ll get less of it,” he wrote. “That’s exactly why the tax on super-sized university endowments is wise. We need less elite snobbery, condescension, and civic irresponsibility. Which means we need less elite education.”
Rank-and-file conservatives seem to agree. In a recent Pew Research Center poll, 58 percent of Republican voters said they believe that institutions of higher education are negatively influencing the direction of the country.
As insane as campus culture can be, congressional Republicans should stop exploiting anger at the academy to make ends meet. The university endowment tax will disincentivize growing institutions and punish established colleges — such as our own — which uphold the values culture warriors claim to defend.
Thanks to the generosity of friends of the college, Hillsdale has a remarkably large endowment for an institution of its size. Provost David Whalen told the Collegian in 2013, “It is not too much to say the endowment is what permits the independence of the college. If the college did not have the endowment it would not be able to afford students’ scholarships.”
The proposed endowment tax challenges Hillsdale’s prized independence. 1.4 percent may seem like a meager number, but the costs of running an educational institution can add up. On top of that, any time a new tax is introduced, Congress could raise it at any given time in the future — meaning that this proposal could set a dangerous precedent.
Grove City College, Wyoming Catholic College, and other schools that refuse to accept government funding are looking to achieve the same kind of independence we have. Even if their endowments do not trigger the tax yet, the tax could still make it harder for them to grow.
Conservatives ought to look to encourage this growing movement rather than stifle it. Legitimate complaints against the academy are complaints about institutions which have forgotten their purpose, not the idea of scholarship or liberal education.
Reno and other conservatives support the endowment tax insofar as it hurts their enemies. Hillsdale College, on the other hand, is trying a different approach. To take back the academy, we’re offering an alternative to its relativism and intolerance.
America needs more elite education, not less. We should be trying to redeem the academy and restore its purpose. The endowment tax inhibits that mission, and the Senate should remove it from the final version of their tax-reform bill.
Michael Lucchese is a senior majoring in American studies.