Trump Stumbles on Good Idea: Take Away Harvard’s Tax Breaks

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When I’m right, I’m right. Photo: Jeff Swensen/Getty Images

Donald Trump says that wealthy universities should use their endowments to provide students with a cheaper education — or else forfeit the tax exemption on those endowments.

“What a lot of people don’t know is that universities get massive tax breaks for their massive endowments,” Trump said at a rally in Pennsylvania Thursday night. “These huge, multi-billion-dollar endowments are tax-free, but too many of these universities don’t use the money to help with the tuition and student debt.”

Instead, Trump argued, these wealthy schools should spend their money on administrators and equity-fund managers. The Republican nominee promised to change this state of affairs, by crafting reforms that force colleges to make “good faith” efforts to reduce student debt. Attaining a higher education “should be easier to access, pay for and finish,” the mogul argued.

A broken clock is right twice a day. Donald Trump is correct far less often. But he does, on occasion, have himself a point.

Your average elite university has become an enormous hedge fund with a side business in research and education. Harvard spends roughly $800 million on research every year — and $4.2 billion in total operating expenses. As New York’s Annie Lowrey notes, the university has used its wealth to buy up enormous amounts of land in Cambridge, driving up real-estate prices while contributing little, if anything, in property tax. Revoking its nonprofit status would provide the state of Massachusetts with an additional $80 million a year. Considering that Harvard recently spent a billion dollars renovating its student dorms, the Bay State can probably be trusted to find a more socially useful way to invest that $80 million.

To be sure, taxing the endowments of elite universities would not solve the student debt crisis, which has had some of its most devastating effects on low-income students who drop out of public colleges. But there are plenty of other reasons to start taxing these institutions. And if the government put a limit on how much wealth they could hoard, it’s possible they’d spend some of their excess capital on increasing financial aid.