Higher taxes for Harvard and Yale are the kind of class war that Republicans can get behind. And it’s all the more consistent with the modern GOP’s brand if the revenue pays not for some higher cause, but for tax cuts demanded by billionaire campaign donors.
On Thursday, the House passed a major tax overhaul bill; the Senate is debating its own. Both versions slash corporate taxes and shower benefits on the wealthiest individual taxpayers. But in a populist flourish, the bills also impose new taxes on dozens of the nation’s fanciest private colleges — that is, those with the most assets per student.
Sure, Harvard president Drew Gilpin Faust can protest that her school’s $37 billion endowment is “at work in the world,” paying salaries and funding scholarships. But the Ivy League is an easy target — especially at a time when, according to Pew Research Center, most Republican voters think colleges and universities in general have a negative effect on the country.
Indeed, the House’s tax plan in particular declares war on the entire higher education sector, which for all its foibles is still an engine of upward mobility. The House bill would eliminate tax breaks for student loan interest and impose taxes on the tuition waivers that allow graduate students to squeeze by on modest incomes while completing their dissertations. These changes could choke off the pipeline of future scientists, and would cost students an estimated $65 billion over a decade.
When government tries to squeeze tens of billions out of anybody, it’s only natural to ask: What for? When cities and towns raise property tax rates, or a state legislature zeroes out longstanding tax breaks, fiscal conservatives want to know: What are you going to do with the money? The answers usually involve road and bridge repairs, public safety improvements, better schools, and other common goods.
The legislation now in Congress comes billed as “tax reform” — which, when Ronald Reagan did it, meant a revenue-neutral plan to simplify the tax code and cut out loopholes. That’s not what this is. The House and Senate bills would increase the national debt by about $1.5 trillion over a decade. They’re built mainly to deliver deep, permanent cuts in corporate taxes and the tax on inherited wealth, plus modest, temporary cuts in individual income tax rates. To make the numbers work, there are sneaky tax increases like the ones involving higher education. Millions of Americans will end up paying more.
Republican lawmakers don’t pretend that this “reform” effort serves some ennobling social goal. “My donors are basically saying, ‘Get it done or don’t ever call me again,’” said Representative Chris Collins, a New York Republican. If tax legislation fails, South Carolina Senator Lindsey Graham declared, “the financial contributions will stop.”
The Senate bill, which at least preserves existing tax breaks for student loans, would eliminate the deduction for state and local taxes. Instead of college kids, Senate Republicans are thumbing their nose at blue states that pay for education and infrastructure out of their own funds. (Not coincidentally, states like Massachusetts, California, and Connecticut already contribute far more to federal coffers than they get back, because they’re more productive than states that refuse to invest in themselves.)
Tellingly, GOP plans largely preserve one of the donor class’s favorite tax subsidies, the so-called carried-interest loophole. That’s the break that lets Warren Buffett and other wealthy financiers pay lower tax rates than their secretaries. It’s the same break that President Trump himself vowed to eliminate during his campaign. “Hedge fund guys,” he famously said, are “paper-pushers” who are “getting away with murder.”
They still are. But if you’re pushing a mop at a college, though, watch out. Because employees and their dependents get free tuition at many colleges and universities, taking a job at one of them is a terrific option for working parents who hope to educate their children on the cheap. Consider Fred Vautour, a Boston College night-shift custodian whom the Globe profiled last year. Vautour’s five children got tuition-free degrees from the school because their father worked there. The House plan would tax the value of the tuition waiver, now worth more than $50,000 per child per year.
As an economic policy, the tax legislation doesn’t make much sense. When profits are soaring, deep cuts in corporate tax rates are hardly a pressing need. And as widening inequality frays America’s social fabric, it’s absurd to ask someone like Vautour to dig deeper so that Ivanka, Eric, and Donald Jr. can avoid taxes on money they did nothing to earn.
Of course, GOP tax writers are betting middle-class voters won’t notice, as long as college presidents are on the defensive. The proposed new tax on endowments at Harvard and Yale won’t generate much money, but it does play the signature trick of Trump-style Republicanism: It sets up a symbolic confrontation with the elite, even as it systematically enriches the wealthiest.