Tax the Rich (Universities)!
{Reproduced from Inside Higher Ed}
February 11, 2022
Through most of the past months, progressive Democrats fought to pass a Build Back Better plan that required taxing the rich. Although it’s fairly certain that Build Back Better will not pass, we really should tax the rich. After all, according to a recent study, billionaires in the United States got $1.8 trillion richer during the pandemic, while eight million more Americans—mostly Black, Latinx and children—slipped into poverty.
Taxing wealth is the obvious way to help with income inequality. For the first time in decades, the Democrats—with exception of two senators—were not afraid to say it aloud. Progressive icon Alexandria Ocasio-Cortez even wore “tax the rich” on a gown to the Met Gala. Maybe that’s because a majority of Americans support a wealth tax?
It now seems acceptable to tax the rich, but no one is saying “tax elite universities”—the one group of billionaires hoarding wealth that seems to go under the radar of policy planning and populist scrutiny. That’s probably because these billionaire education institutions have done a great job of convincing us of two things, both of which are questionable: 1) they are a true meritocracy and everyone deserves to be there, and 2) they are increasingly accessible to all.
The fact is that elite higher educational institutions educate mostly elite higher-income students. At my institution, Middlebury College, 23 percent of students are from families in the top 1 percent of earners, while only 14 percent are from the bottom 60 percent, according to a 2017 analysis of data by the Equality of Opportunity Project (now Opportunity Insights). Meanwhile, racial diversity hasn’t budged much at elite colleges for the past 15 years, despite all the talk of the “most diverse class ever.” According to my own research using the Common Data Set, the number of white students at elite New England Small College Athletic Conference institutions like Middlebury hasn’t changed over that period. It’s a little better at Harvard and Princeton Universities, but not much. And few students come from the working classes. At Harvard, for instance, only 17 percent of students qualify for Pell Grants (meaning their families make less than $60,000 a year). It’s only 14 percent where I teach.
Unless you think the rich are just innately smarter than the rest of us, these numbers should make clear that not everyone at the Middleburys and Harvards of the world deserves to be there. The truth is, the wealthiest and whitest students benefit from a huge amount of affirmative action, as recent documents from a lawsuit against Harvard reveal. According to those documents, 43 percent of the white students at the university are either legacy students, athletes or related to donors or other influential employees.
Legacy admission is an obvious giveaway to whiter, wealthier kids, but sports are really no different. In the Ivy League, 65 percent of athletes are white, according to estimates from the National College Athletic Association, and they are often held to a lower standard of admission than nonathletes. And at elite colleges, those athletes often play sports like golf, lacrosse or water polo, which are so expensive that they require a lot of investment from families, thus giving athletes a leg up. Worse, apparently now some of the rich are simply bribing their way into elite institutions by paying coaches to say their kids play a sport, as the recent charges against more than 60 parents in a college-sport admissions scam have revealed.
Although I cannot support that type of bribery, I am not opposed to colleges continuing other forms of affirmative action for the rich. If elite educational institutions wish to remain a kind of finishing school for affluent children while also adding some small amount of racial and economic diversity into the mix, so be it. But why should we as taxpayers have to subsidize them? Why not tax their wealth and use that money to make universal higher education a reality in the United States—the way it is in nearly every industrialized country?
Imagine how much more money we could have for vital social programs for our nation if we taxed endowments? Harvard’s is $53 billion and, because it’s invested in the stock market, growing tax-free. Yale’s endowment grew by 40 percent this year, making it worth more than $42 billion. “Tax-free” makes it sound like there are no costs to such endowments, but they’re actually tax subsidized by us, the taxpayers. One 2015 report by the Nexus Research and Policy Center estimated that Princeton received an additional $100,000 per student, compared to about $2,400 per student at a nearby community college.
If we really wanted to support underprivileged students, we would, for starters, stop subsidizing the Harvards and Middleburys and redistribute that wealth to community colleges and public universities. The tax subsidies that elite colleges receive are hardly used to educate the masses, despite the rhetoric of “intergenerational equity.” Instead, many endowments are “hoarded” and protected at all costs, often resulting in more or higher administrative salaries but relatively stagnant salaries for professors and unlivable wages for far too many of the staff members who make these institutions run. So, in the end, most university workers as well as students suffer.
If we had the academic equivalent of a Met Gala, I would wear a stylish gown with “tax the endowments” on it. Or, now that I think about it, this might work on graduation robes, as well.