CHUCK GRASSLEY'S CRUSADE TO TAX UNIVERSITY ENDOWMENTS

Pacific Standard reports:

There are innumerable reasons to scrutinize the newly appointed chairman to the Senate Finance Committee. Namely, it's a uniquely powerful position with a long reach into the federal government's strategies for taxation and revenue generation. And when Chuck Grassley (R-Iowa) assumes the role for the 116th Congress, few entities will pay closer attention to his every move than the nation's wealthiest colleges and universities.

About a decade ago, Grassley started badgering the financial gatekeepers of the ivory tower with what was surely seen as a meddlesome question: Why, in light of the tax-free growth of many university endowments, has tuition spiked so dramatically? The solution he bandied about raised administrative anxiety to an even higher level: Universities should be regulated, he suggested, much as private foundations are, with 5 percent of its income having to be distributed rather than reinvested in the endowment.

Politically speaking, the issue had a hard time gaining traction. Grassley initially turned his attention to the matter in 2008, when it was revealed that 76 universities had endowments over $1 billion. In response to what one legal scholar called a "colossal reserve of wealth," the Senate Finance Committee, of which Grassley was then a ranking Republican, requested detailed information from the nation's 136 richest schools. The left saw a witch hunt at work.


But what Grassley learned over the ensuing years raised some eyebrows in the committee room. To cite just a few examples, Harvard University's $32 billion endowment in 2011 generated a 21 percent return on investment (today it's at $37 billion with a 16 percent return); Yale University's $19 billion endowment reached a 22 percent return on investment in the same year (today it's $29.4 billion with a 13 percent return). The other 74 universities in the billion-and-over category saw similar gains, proportional to their investments.

At the same time, tuition costs have exploded. Between 2010 and 2011 the price tag for a four-year private college (non-profit) rose by 4.5 percent, and by more than 8 percent at public schools. Since 1986, the cost of higher education has gone up by 500 percent. On the other hand, as endowments have been expanding—again without taxation on its returns—university administrations have been proliferating alongside their salaries. Leading the expansion in administrative salary bloat were university presidents, whose median salary—for private schools—spiked 5.6 percent to $436,000 between 2012 and 2013 alone.

It's moments like these in which some university presidents probably wished they had more Republicans on campus. It appears Republicans have learned to tax their enemies.