May 29, 2008 | Read Time: 1 minute
Sen. Charles Grassley of Iowa is still considering proposing legislation that would require colleges and universities to distribute at least 5 percent of their endowments each year..
Mr. Grassley, the senior Republican on the Senate’s powerful Finance Committee, wrote in an opinion article published in The Chronicle of Higher Education to express concern that colleges and universities are not doing enough to make higher education more affordable.
Several major universities — including Harvard University, Yale University and Stanford University — have announced plans in recent months to reduce tuition costs and increase aid to students from lower- and middle-income families. Those plans followed a Finance Committee hearing last fall in which Mr. Grassley and others called for more scrutiny of college endowments.
But while the changes have mollified the concerns of some observers, Mr. Grassley writes that he is not yet convinced that all colleges and universities are doing enough to justify their tax-exempt status.
“Not only are higher-education institutions exempt from federal taxes, but their endowments are tax-free, and donations to them are tax-deductible. Part of the recent endowment spike came from the aggressive use of off-shore tax-avoidance strategies,” he writes. “Taxpayers pay for federal tax incentives to make higher education more accessible and affordable through 529 college-savings plans, a deduction for taxpayers filing jointly of up to $4,000 for tuition (depending on income), and the tax deductibility of interest on student loans.
“Such favorable tax treatment came through Congress, specifically through the Senate Finance Committee. Congress has an obligation to make sure those tax policies are working as intended.”
