Like many prestigious private colleges, Washington and Lee University relies heavily on a pool of funding created through gifts known as an endowment. The liberal arts school in Virginia holds an endowment of more than $1.5 billion to support its mission and operations. Investment returns from those funds provide 40 percent of the school’s operating revenue, with nearly half of the endowment payout this year supporting student financial aid. Much of the rest of the payout is restricted to other uses donors stipulated when they made their gifts.
Now, Republicans in Congress are aiming to tax endowments of Washington and Lee and dozens of other private colleges and universities. Many of those GOP lawmakers, including six from Virginia, are graduates of schools they propose to tax.
At issue is a provision in the House-passed tax overhaul that would impose a 1.4 percent excise tax on investment earnings at private schools that hold endowments worth at least $250,000 per student. Similar language has appeared in a version of the tax bill moving in the Senate.
Endowments have drawn scrutiny in recent years from skeptics who wonder why elite colleges have amassed so much wealth at a time when they are also raising tuition. Supporters of the endowment tax have said it would treat affected schools — 60 to 70 nationwide, including big names from the Ivy League and lesser-known colleges — the same as private foundations that also pay taxes. Opponents of the proposal say that colleges have fundamentally different missions than foundations and that endowments help schools weather economic crises and contain cost increases.
Washington and Lee, with enrollment of 2,160 as of fall 2016, easily meets the threshold for taxation. School officials calculate that if the endowment tax had been in place for the past 20 years, the university would have been charged $14.85 million.
“It is because of our endowment that we have been able to eliminate the need for undergraduates to take out student loans,” Washington and Lee media and community relations director Drewry Sackett said in an email. “We have also waived tuition entirely for students who come from families with annual incomes of less than $75,000. In addition, the tax on endowment would limit the support we would have for specific purposes that donors have designated.” Among those purposes, Sackett said, are professorships, departmental operations and well-known programs such as the Roger Mudd Center for Ethics.
Among the Republicans who voted for the House tax bill on Nov. 16 was Rep. Bob Goodlatte (Va.), who graduated from Washington and Lee’s law school in 1977. His district, Virginia’s Sixth, includes the university’s campus in Lexington and surrounding areas. Sackett said Washington and Lee communicated its concerns about the tax bill to Goodlatte. Like other backers of the bill, Goodlatte says that the tax cuts within it, totaling an estimated $1.5 trillion over a decade, will spur the economy and help families and businesses. The endowment tax, which would net $2.5 billion in that time, is a relatively small piece of the overhaul.
Asked about the provision, Goodlatte said in a statement: “This proposal is aimed at ensuring our private colleges and universities are focused on the mission of education, not growing a financial portfolio.” He added that he is proud of the colleges and universities in his district. “I continue to work with my colleagues and with the leaders of these institutions to advocate for an equitable solution that supports education.”
Rep. Morgan Griffith (R-Va.), another Washington and Lee law graduate (class of 1983), also voted for the bill. His office did not respond to a request for comment.
Four other Virginia Republicans also supported the bill that would tax their alma maters. They were Reps. Dave Brat, who holds a master’s degree from Princeton Theological Seminary (1990); Barbara Comstock, who earned a bachelor’s from Middlebury College (1981); Thomas Garrett, with bachelor’s and law degrees from the University of Richmond (1994 and 2002); and Scott Taylor, with a bachelor’s from Harvard University’s Extension School (2013). The offices of Brat, Comstock and Garrett did not respond to emails seeking comment. Taylor’s spokesman declined to comment.
Princeton Theological Seminary, with about 560 students in the last school year and an endowment of roughly $1 billion, said it expects it could be affected by the provision. The Rev. Anne W. Stewart, associate vice president for communication, said in an email that the New Jersey seminary has “grave concerns” about the proposal.
“Our graduates are entering the service professions,” Stewart wrote. “They are pastors, teachers and chaplains. They work in nonprofits and other forms of public service. While these professions do not command high salaries, they are important to the flourishing of our society. These students give their lives to serve the good of humanity, and we want to make their education possible without crippling debt. The proposed tax would compromise our ability to do this.”
Bill Burger, Middlebury’s vice president for communications, said the tax would be “certainly detrimental” to higher education. The college in Vermont, with 2,500 students, has an endowment of nearly $1.1 billion. If the tax had been in place in the last year, Burger said, it would have cost Middlebury $600,000. “That’s real money,” he said. “That’s 12 scholarships, right? Our endowment is how we can afford to be as diverse as we are.”
The House passed its tax bill on a vote of 227 to 205, with 13 Republicans breaking party ranks to oppose the measure. All Democrats opposed the bill, except two who did not vote.
Below, in alphabetical order, are 40 House Republicans who voted for the tax bill and hold degrees from colleges affected by the proposed endowment tax. Information on degrees was drawn from the Biographical Directory of Congress. The American Council on Education, which represents colleges and universities, provided a list of affected schools.
- Dave Brat (Va.): Princeton Theological Seminary, master’s of divinity, 1990
- Jim Bridenstine (Okla.): Rice University, bachelor’s, 1990
- Mo Brooks (Ala.): Duke University, bachelor’s, 1975
- Ken Buck (Colo.): Princeton University, bachelor’s, 1981
- Bradley Byrne: (Ala.): Duke, bachelor’s, 1977
- Liz Cheney: (Wyo.): Colorado College, bachelor’s, 1988; University of Chicago, law, 1996
- Tom Cole (Okla.): Grinnell College, bachelor’s, 1971; Yale University, master’s, 1974
- Barbara Comstock (Va.): Middlebury College, bachelor’s, 1981
- Warren Davidson (Ohio): University of Notre Dame, master’s in business administration, 2005
- Ron DeSantis (Fla.): Yale, bachelor’s, 2001; Harvard University, law, 2005
- Neal Dunn (Fla.): Washington and Lee University, bachelor’s, 1975
- Mike Gallagher (Wis.): Princeton, bachelor’s, 2006
- Thomas Garrett (Va.): University of Richmond, bachelor’s, 1994, and law, 2002
- Bob Goodlatte (Va.): Washington and Lee, law, 1977
- Morgan Griffith (Va.): Washington and Lee, law, 1983
- Brett Guthrie (Ky.): Yale, master’s in public and private management, 1997
- French Hill (Ark.): Vanderbilt University, bachelor’s, 1979
- Trey Hollingsworth (Ind.): University of Pennsylvania, bachelor’s, 2004
- Mike Kelly (Pa.): University of Notre Dame, bachelor’s, 1970
- Thomas Massie (Ky.): Massachusetts Institute of Technology, bachelor’s, 1993, and master’s, 1996
- Brian Mast (Fla.): Harvard University Extension School, bachelor’s, 2016
- Michael McCaul (Tex.): Trinity University of Texas, bachelor’s, 1984
- Martha McSally (Ariz.): Harvard University, master’s in public policy, 1990
- Pat Meehan (Pa.): Bowdoin College, bachelor’s, 1978
- Luke Messer (Ind.): Wabash College, bachelor’s, 1991; Vanderbilt, law, 1994
- John Moolenar (Mich.): Harvard, master’s in public administration, 1989
- Alex Mooney (W.Va.): Dartmouth College, bachelor’s, 1993
- Pete Olson (Tex.): Rice, bachelor’s, 1985
- Bruce Poliquin (Maine): Harvard, bachelor’s, 1976
- John Ratcliffe (Tex.): Notre Dame, bachelor’s, 1987
- Todd Rokita (Ind.): Wabash, bachelor’s, 1992
- Keith Rothfus (Pa.): Notre Dame, law, 1990
- F. James Sensenbrenner (Wis.): Stanford University, bachelor’s, 1965
- Mike Simpson (Idaho): Washington University in St. Louis, dental medicine, 1978
- Lamar Smith (Texas): Yale, bachelor’s, 1969
- Scott Taylor (Va.): Harvard Extension, bachelor’s, 2013
- Claudia Tenney (N.Y.): Colgate University, bachelor’s, 1983
- Dave Trott (Mich.): Duke, law, 1985
- Bruce Westerman (Ark.): Yale, master’s in forestry, 2001
- Joe Wilson (S.C.): Washington and Lee, bachelor’s, 1969
Here are three House Republicans who voted against the tax bill and hold degrees from schools affected by the proposed endowment tax.
- Pete King (N.Y.): Notre Dame, law, 1968
- Leonard Lance (N.J.): Princeton, master’s, 1982; Vanderbilt, law, 1977
- Elise Stefanik (N.Y.): Harvard, bachelor’s, 2006
Here are Senate Republicans who hold degrees from schools affected by the proposed tax. A vote on the bill could come as early as this week.
- Lamar Alexander (Tenn.): Vanderbilt, bachelor’s, 1962
- Shelley Moore Capito (W.Va.): Duke, bachelor’s, 1975
- Mike Crapo (Idaho): Harvard, law, 1977
- Tom Cotton (Ark.): Harvard, bachelor’s, 1998; Harvard, law, 2002
- Ted Cruz (Tex.): Princeton, bachelor’s, 1992; Harvard, law, 1995
- John Cornyn (Tex.): Trinity (Tex.), bachelor’s, 1973
- John Hoeven (N.D.): Dartmouth, bachelor’s, 1979; Northwestern, master’s, 1981
- John Kennedy (La.): Vanderbilt, bachelor’s, 1973
- Rob Portman (Ohio): Dartmouth, bachelor’s, 1979
- Pat Toomey (Pa.): Harvard, bachelor’s, 1984
- Ben Sasse (Neb.): Harvard, bachelor’s, 1994; Yale, PhD, 2004
- Daniel Sullivan (Alaska): Harvard, bachelor’s, 1987