TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Friday, April 5, 2013

Taxing and Tuition: A Legislative Solution to Rising Endowments and College Costs

Matt Willie (J.D. 2012, BYU), Comment, Taxing and Tuition: A Legislative Solution to Growing Endowments and the Rising Costs of a College Degree, 2012 BYU L. Rev. 1665:

Part II begins by discussing the rising costs of college tuition and the growing concern over educational access. It then offers a brief introduction to university endowments and discusses the most commonly recognized justification for their existence and growth: intergenerational equity. This justification and its outgrowths have been the subjects of significant academic criticism, and scholars have suggested new theories for endowment accumulation that cut against normative arguments for awarding universities tax-exempt status. Part III discusses the advantages and criticisms of the most commonly debated policy proposals related to university endowments. Unfortunately, all of these proposals suffer from the same defect: they are unlikely to significantly impact the affordability of higher education.

Thus, in Part IV, this Comment argues that tying an endowment tax directly to tuition increases represents a unique solution. Unlike other endowment-related measures, such a tax would discourage tuition hikes without encouraging wasteful spending. Perhaps more important, it would not necessarily discourage endowment growth or require cuts to current levels of funding for other important academic pursuits, such as research. This would leave room for universities to pursue traditional goals of intergenerational equity while still being closely tethered to their tax-exempt purposes.

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