Commentary: Tax All Foundations and Endowments Now

by Theadore Roosevelt Malloch

If there were trillions of dollars socked away in convenient vehicles to avoid taxes and benefit the ultra-elite should we not tax them? Are they not fair game in a just system of taxation, where the little guy and the middle class have to pay up—or else?

The largest endowments, mainly universities indoctrinating students in social justice, wokeism, and class warfare, pay absolutely no taxes.

The big foundations, promoting radical left-wing activism, likewise pay no taxes.

For the record, the largest university endowments are:

1) Harvard University, $40.92 billion
2) Yale University, $30.29 billion
3) Stanford University, $27.69 billion
4) Princeton University, $25.62 billion
5) Massachusetts Institute of Technology, $17.44 billion
6) University of Pennsylvania, $14.64 billion
7) Texas A&M, $12.63 billion
8) University of Michigan-Ann Arbor, $12.27 billion
9) University of Notre Dame, $11.56 billion
10) Columbia University, $10.95 billion
11) University of California (system), $10.85 billion
12) Duke University, $7.82 billion
13) University of Chicago, $7.59 billion
14) Washington University, $7.28 billion
15) Emory University, $7.23 billion
16) Cornell University, $6.95 billion
17) University of Virginia, $6.27 billion
18) Rice University, $5.58 billion
19) University of Southern California, $5.94 billion
20) Dartmouth College, $5.21 billion

The largest private foundations by assets are:

1) Bill and Melinda Gates Foundation, $33.11 billion
2) Ford Foundation, $11.95 billion
3) Lilly Endowment, $10.24 billion
4) Foundation to Promote Open Society, $10.12 billion
5) Robert Wood Johnson Foundation, $9.64 billion
6) Bloomberg Foundation, $7.81 billion
7) Hewlett Foundation, $ 6.85 billion
8) W.K. Kellogg Foundation, $6.81 billion
9) J. Paul Getty Trust, $6.81 billion
10) Packard Foundation, $ 6.67 billion
11) Mellon Foundation, $6.08 billion
12) Moore Foundation $6.05 billion
13) Helmsley Charitable Trust, $5.37 billion
14) MacArthur Foundation, $5.25 billion
15) Rockefeller Foundation, $3.86 billion
16) Walton Foundation, $3.65 billion
17) Kresge Foundation, $3.52 billion
18) California Endowment, $3.46 billion
19) Open Society Foundation, $3.41 billion
20) JHB Foundation, $3.39 billion
21) Carnegie Endowment, $3.32 billion
22) Duke Endowment, $3.30 billion
23) Woodruff Foundation, $2.94 billion
24) John Templeton Foundation, $2.89 billion
25) Cargill Foundation, $2.77 billion

In fact, nonprofit colleges and universities and private endowments in the United States are generally free, not just from the federal corporate income tax, but also from state corporate income tax and from state and local property taxes. They are often free as well from state and local sales tax on items that they purchase and sell.

Why would we want or allow this?

Any arguments about educational benefits or contributions to society writ large are bogus and should be called out for what they are—false.

These institutions are free riders, and they are in effect forcing the rest of us to pick up their tab. They don’t pay their “fair share”—they actually pay nothing at all.

Enter Senator Tom Cotton (R-Ark.), with true presidential timber, who has introduced a bill to tax the value of the endowments of America’s wealthiest private colleges.

Here is what Cotton’s “Ivory Tower Tax Act” would do:

• Levy a one percent tax on the fair market value of endowments held by the richest private colleges. The tax would apply to private colleges that have more than 500 full-time enrolled students; have endowments worth more than $2.5 billion and $500,000 per full-time enrolled student, and do not have a religious mission

• Generate an estimated $2 billion in revenue per year, which would be redirected to support vocational and apprenticeship training programs

• Require the richest private colleges to distribute at least five percent of their endowment to support their educational mission per year, or else face a penalty. This requirement mirrors the tax treatment of private foundations.

Cotton’s bill would be a good if small step in the right direction, but it does not go nearly far enough. Still, it would help to level the playing field in the battle of elitists (and for the record, I previously taught at Yale) and the middle class. The idea begins to address two problems at once: increasing economic equality and offering more opportunity.

Conservative populists should applaud Cotton-like proposals. They are Trump-inspired and address real-life needs as they help the “strivers” in our socio-economic setting who are too often ignored or neglected.

Schools such as Harvard and Yale, along with billionaires like George Soros, Mark Zuckerberg, Jeff Bezos, and their ilk won’t like this plan—they have the most to lose, which is a good reason to do it but take it two big steps further.

As designed, Cotton’s plan would only raise about $2 billion annually. So why not say any university with an endowment should pay what you and I pay on our investments. The Net Investment Income Tax is imposed by section 1411 of the Internal Revenue Code. The NIIT applies at a rate of 3.8 percent to certain net investment income of individuals, estates, and trusts that have income above the statutory threshold amounts. All these institutions should be taxed at the same rate.

And second, why stop at university endowments? Those private endowments should be taxed at the same prevailing rate. Having served on three of these large foundation boards, I can attest that they are self-serving, pay excessive salaries to their top officers and staff, and within three generations most are totally unrecognizable to their founders’ intentions. They bend leftward fast.

Tax them.

If we did both of these things and could convince a willing Senator Cotton and his fellow travelers to go along that would raise real money.

Do the math—$600 billion of all university and college endowments and just over $1 trillion in other foundation assets would yield more than $6 billion a year. That’s nothing to sneeze at and long overdue.

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Theodore Roosevelt Malloch, scholar-diplomat-strategist, is CEO of the thought leadership firm The Roosevelt Group. He is the author of 18 books, including The Plot to Destroy Trump and appears regularly in the media, as a keynote speaker, and on television around the world. 
 

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