See excerpts below the fold of:
New York Times: Gold in the Ivory Tower (op-ed), by Herbert A. Allen:
America’s wealthiest colleges have endowments that are thousands of times greater than those at the least fortunate schools. The chasm is far deeper than that in other realms. After all, overpaid chief executives and investment bankers pay inheritance and income tax, so their wealth diminishes over time. Heavily endowed colleges and universities, however, suffer no such setbacks. ...
But should they be allowed to be so protected by the tax code that they can use their disproportionate wealth to raid poorer colleges and scoop up the best teachers by offering better pay, benefits and tenure-track positions? Should they further separate themselves from less fortunate colleges by taking the best high school students and offering them ever richer deals? ...
What to do? Well, here’s one solution: tax the investment income of the wealthiest colleges (though not their endowments). If the endowments of all academic institutions were evaluated on a per student basis, a standard could be set that could begin to allow revenue sharing. Our graduated income tax system sets varying tax rates based on income levels. Similarly, we could establish standards for the endowments of colleges and universities.
An example: Harvard or Williams (my alma mater) have endowments that are well over $500,000 per student. Why not take the colleges whose endowments exceed that per student amount and tax their capital gains? The tax revenue could then be put into a designated pool and distributed pro rata to colleges under the base level. The college with the lowest per student endowment would get the highest share.
Inside Higher Ed: A Broad Review of College Tax Compliance, by Doug Lederman:
The IRS plans to survey hundreds of colleges and universities in 2008 to better understand how they invest and use their endowments, set executive compensation, and calculate their unrelated business income. The information gained from the survey is designed to give the government a clearer sense of whether postsecondary institutions are engaging broadly in practices that, as they have come to light anecdotally, have raised the hackles of some lawmakers and others.
GAO, Tuition Continues to Rise, but Patterns Vary by Institution Type, Enrollment, and Educational Expenditures (GAO-08-245): Summary of Findings:
More students are enrolling in college than ever before, and an increasingly larger percentage of all students are minorities.
While the types of schools in which students enroll have largely remained stable, the distribution of enrollment has shifted for some minority groups.
Although average tuition and fees increased for all institution types, the smallest tuition increases occurred at institutions that enroll the largest proportion of college students.
Between the 2000-2001 and 2005-2006 school years, increases in average tuition and fees were matched or exceeded by increases in average institutional spending on education at private institutions, but not at public institutions.