An Immodest Proposal

The growing debate over tax reform became specifically relevant to Harvard last week when United States Congressman David L. Camp, a Michigan Republican issued a tax plan that proposed a set of reforms. These included reduction of the top individual tax rate, abolition of a minimum tax rate, and, most obviously pertinent to Harvard, an excise tax on university investment incomes. While tax reform is a pertinent subject that should be kept on the table for continued discussion, such a plan fails to address the main flaws within the tax system itself, and Congress is doing the country ill by looking to universities as quick sources of federal revenue.

The Congressman’s plan only aims to tax private institutions of higher learning with endowment assets of at least $100,000 per full-time student, and therefore targets only a certain pool of wealthier universities within the US, including Harvard. While it may be easy to envision further taxation of such a large endowment, we find that the congressman’s plan avoids greater problems with America’s tax code. If the new plan’s purpose is to effectively tax entities with large accumulations of wealth, then it fails to do so by reducing the top individual tax rate, as well as ignoring all the corporate loopholes that make tax reform so necessary.

There is little reason why universities like Harvard should be targeted more than other high-wealth institutions. Such universities can be thought of as corporations, but unlike hedge funds, they perform countless forms of public service—whether that means pouring millions of their own dollars into research, funding humanitarian efforts, or giving financial aid so that students from lower income brackets can have access to higher education. We wonder why such institutions would be subjected to taxation while other loopholes allow Warren Buffet to pay a lower tax rate than his secretary, and permit the NFL to be tax-exempt.

Congressman Camp, who last year convinced President Obama to lower the corporate tax rate, should be applauded for his attempts toward reform, but his current plan targets the wrong institutions for tax revenue. Implementing such a plan would indirectly take away from funds toward public service. If the Congressman’s goal is to target large accumulators of wealth, he might have more success looking to greater problems within the tax code itself.