We Deserve More from a Tax-Exempt Yale
Talk of taxing the Yale Endowment is trendy. From a 2016 Connecticut State Bill last fall to the newly-unveiled Republican tax plan, it appears both sides of the aisle are salivating over the taxable green of college endowments.
And why shouldn’t they, after Yale’s “modest” 8% return sent its endowment soaring to a whopping $27.2 billion in the 2016 fiscal year? The university, not subject to a capital gains tax on the $3.5 billion return, chose the same year to open two new residential colleges paid for by tax-exempt donations. It’s no wonder this issue has made strange bedfellows of the Bernie Bros and the Trumpian Populists.
In fact, members of the left and right seem equally committed to preventing top schools, educating a gilded selection of students, from hoarding vast sums of money in their endowments. According to the most outspoken politicians, if Yale operates like a for-profit institution — with its high tuition, luxurious dorms and voracious expansion — it should be taxed like one.
Regardless of what leaders decide this political cycle, there is currently a judgement we all have to make. New Haveners, especially those of us affiliated with Yale, must demand more from our university. To flip the politicians’ maxim on its head, if Yale is not taxed as a for-profit institution then it sure as hell should not be acting like one.
According to the traditional Ivy League rhetoric, the public actually has much to gain from Yale’s tax-exempt status. From generous financial aid to cutting-edge research laboratories, institutions of elite education have the resources to provide the public with excellent leaders and thinkers while lifting their fair share of students out of poverty.
Top-tier schools like Cornell have been emphasizing that opinion in the wake of the new Republican plan, which advocates a 1.4% tax on returns for private institutions with endowments of over $250,000 per student.
“[This plan] would likely have the perverse effect of making colleges and universities like Cornell more expensive while reducing our ability to provide quality education for economically disadvantaged students, conduct research for the public good, and undertake public engagement services that are critical to our mission,” said Cornell president Marsha Pollock.
The issue with a member of the Ivy League claiming to be a force of public good is that their definition of “public” is often too narrow to do much good for those in need. For instance, the addition of Pauli Murray and Benjamin Franklin Colleges certainly expands access to a Yale education — at least to those talented or fortunate enough to get in. Less frequently mentioned are those displaced by the soaring housing prices in the surrounding Dixwell Neighborhood.
If Yale stands to benefit from its non-profit status, then it has a duty to mitigate the effects of its expansion, particularly if those expansions are made possible in part by its very status as a force for social good.
Yale can begin by increasing its funding of affordable and public housing in New Haven, particularly in areas affected by Yale construction. After all, it’s not just the new colleges that lead to gentrification in New Haven. Where is the direct public benefit of endowment bankrolled Yale building projects? How exactly do residents “benefit” when they are forced to move from their homes to make way for graduate student housing? Tax-exempt construction projects that destroy neighborhoods in the name of education taint Yale’s mission and call into question the beneficent role it claims to play. New Haven deserves better from its largest non-profit.
For example, the Yale Homebuyer Program, which subsidizes the home purchases of university employees, adheres to a strictly narrow definition of “public” and as a result does nothing for non-employees. And arguably, these subsidies aggravate the already inflated cost of housing in neighborhoods like Dixwell. Expanding that subsidy to those affected by Yale-induced gentrification would be a good first step towards fulfilling the university’s role as a community leader.
In addition, Yale should create an Urban Studies Department, consisting of equal parts education and application of theory to policy. Yale students could take classes to better understand their place in the larger city, and New Haven would benefit from Yale faculty and students working directly on city matters.
Increasing Yale’s presence in New Haven schools, scrutinizing donors before honoring them with buildings, completing its carbon-neutral campus goals, and allocating more endowment spending to financial aid would all go a long way towards realizing the university’s mission of social responsibility.
If Yale continues to claim a non-profit status, motions such as the ones I have outlined above should be a priority for the Yale Corporation. Yale cannot simply function as a school that exclusively serves the public by cultivating knowledge and leadership in top minds. It must also uphold its social responsibility to the wider community by enacting direct, immediate, and measurable impact in the New Haven area.
Regardless of which tax plan is enacted in this fiscal year, Yale would be well served to create tangible proof of its status as a public benefit. Embracing social responsibility would do more than legitimize Yale’s political claims. It would also benefit both Yale affiliates and their fellow community members by contributing to a better town-gown relationship and a more liveable, more diverse city.
As Yale’s endowment grows at a faster rate than the national economy, the temptation to tax its assets will only increase. As such, lofty rhetoric cannot be the only response schools like Yale provide to convince us that their tax-exempt status benefits the wider community. It’s time to see some proof.
