In the aftermath of the Republican tax cut, the winners and losers have been decided. Winning: the middle class, people that don’t need to itemize anymore, and businesses.
And the losers? Judging from this tweet, the Republican tax break is jeopardizing the future of Harvard University.
The new tax on university endowments will weaken financial aid, faculty and research initiatives, and other institutional programs that support students, professors, and medical and scientific studies https://t.co/FZtxYba4wM
— Harvard University (@Harvard) December 21, 2017
Harvard President Dr. Drew Faust called the tax cut a “blow at the strength of American higher education.” The reason? The new tax law will levy a 1.4% excise tax on the returns of the Harvard endowment.
Harvard boasts the largest endowment in the world at $37,100,000,000.
That’s 37. Point One. Billion. Dollars.
Disconnected and Disingenuous
Let’s investigate how the excise tax will wreck the school. Harvard reported disappointing returns in September of just 8.1%. That means without any fundraising, the Harvard endowment increased over 3 billion dollars in the last fiscal year. If the 1.4% excise tax were applied, it would have resulted in a tax of $42 million.
After absorbing the “blow at the strength of American higher education,” Harvard would only make $2,962,928,000 in returns. Devastating.
With just $2.96 billion in returns, Harvard could:
- Write a $445,000 check to every current undergrad;
- Pay tuition for 68,900 students;
- Give free tuition to the incoming freshman class. And to every incoming class for 53-straight years;
- Hire 10,291 more professors at $287,900 each;
- Hire 2,108 staffers at Dr. Faust’s $1,405,000 annual salary; or
- Hire 52,426 Americans at the median household income of $56,516.
And these are just the returns on the $37.1 billion endowment – we’re not even touching the principle. The excise tax will cause a meager .0011% shrinkage of the Harvard Endowment. 1/9th of 1 percent. What a blow to strength of education in America!
With 49% of Americans living paycheck to paycheck, Harvard’s detachment from reality is striking. Losing .0011% of an endowment will not “weaken financial aid, faculty and research initiatives” one bit. The tax amounts to a rounding error for Harvard yet their response manages to be both disconnected and disingenuous.