Tuesday, October 14, 2014

Where the Money Goes

Former U.S. Secretary of Labor and UC-Berkeley faculty member Robert Reich writes an interesting op ed on the disproportionate tax subsidy resulting from charitable contributions that goes to private, elite universities such as Harvard, Princeton, and Yale.

Imagine a system of college education supported by high and growing government spending on elite private universities that mainly educate children of the wealthy and upper-middle class, and low and declining government spending on public universities that educate large numbers of children from the working class and the poor.  You can stop imagining. That’s the American system right now.  Government subsidies to elite private universities take the form of tax deductions for people who make charitable contributions to them. In economic terms a tax deduction is the same as government spending. It has to be made up by other taxpayers...

A few years back, Meg Whitman, now CEO of Hewlett-Packard, contributed $30 million to Princeton. In return she received a tax break estimated to be around $10 million.  In effect, Princeton received $20 million from Whitman and $10 million from the U.S. Treasury – that is, from you and me and other taxpayers who made up the difference.  Add in these endowments’ exemptions from taxes on capital gains and on income they earn, and the total government expenditures is even larger. Divide by the relatively small number of students attending these institutions, and the amount of subsidy per student is huge...

Full op ed at

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