​Leebron signs letter to Congress asking for reconsideration of endowment tax

By Amy Qin     3/20/18 10:38pm

President David Leebron signed a letter to Congress with 48 other university presidents urging reconsideration of a new national tax on university endowments.

According to Leebron, the tax would cost Rice University roughly $6 million per year, depending on yearly endowment income, the equivalent of 130 full tuition scholarships.

The tax, a 1.4 percent excise tax on private universities with endowments greater than $500,000, was established by the tax act passed by Congress and signed by President Donald Trump in December. According to Inside Higher Ed, the act affects around 30 universities nationwide, including three from Texas: Rice, Baylor College of Medicine and Trinity University, all of whose presidents signed the letter.

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University presidents argued in the letter that the endowment tax will unfairly place restrictions on universities’ efforts to improve education quality and affordability. In Rice’s case, the tax will impede the university’s efforts to expand financial aid, although existing levels of financial aid will not be reduced, according to Leebron.

“This tax will not address the cost of college or student indebtedness, as some have tried to suggest,” the letter states. “Instead, it will constrain the resources available to the very institutions that lead the nation in reducing, if not eliminating, the costs for low- and-middle-income students.”

Although Leebron was not directly involved in drafting the letter, he said he hopes it influences lawmakers to reconsider implementation of the endowment tax.

“Large pieces of legislation like this – written quickly and including hundreds of complicated, often overlapping provisions – are usually subsequently amended in the months following passage into law,” said Leebron. “We hope the letter demonstrates to policymakers that we remain committed to working with them toward a reasonable and fair outcome addressing our concerns.”

Last December, before the release of the Senate version of the tax bill, Leebron wrote an opinion article for the Houston Chronicle arguing against the inclusion of the endowment tax and a tax on graduate student tuition waivers in the GOP bill.

Leebron said he hoped to give voice to the concerns of students and administrators in higher education as well as make the issue known to the greater Houston community.

He argued in his piece that the bill was discriminatory against successful institutions of higher education as well as ineffective in generating revenue.

“It is doubtful that the bill would raise much more than $180 million per year toward closing the projected $1.5 trillion budget deficit increase,” Leebron wrote. “Our Texas congress members should be outraged that three of the 30 or so institutions affected are located here, where they contribute to the best in education and research.”

The tax on graduate student waivers, against which Leebron argues in the piece, was a controversial item in the House-approved tax bill but was ultimately not included in the Senate version released later in December.

“We were pleased that the Senate version of the bill prevailed in this regard, which was due in large part to the advocacy efforts of the graduate student population across America,” Leebron said. “We hope as a result that our educators are more aware of the vital importance of graduate education, and the impact our graduate students have. The mobilization of tens of thousands of voices in opposition definitely had an effect.”

Taylor Morin, a Brown College junior, said he is concerned about how the tax may hurt students’ abilities to pay for school .

“There have been so many strides made by Rice in improving the accessibility of a college education despite the inevitable rising costs, so it is extremely unfortunate that this legislation works in the opposite direction simply because lawmakers needed to replace revenue lost from a corporate tax cut,” Morin said.

In the coming months, Leebron said he hopes that students concerned about the possible repercussions of the endowment tax will contribute their voices to the discussion surrounding its inclusion in the tax bill.

“Let your federally elected officials know what you think because the legislative process never really stops,” Leebron said. “Laws are changed all the time, and interpreted in the legislative process, so continued engagement with lawmakers is a necessary and vital part of democracy. And as you saw with the proposed tax on graduate student tuition waivers, student voices can have a meaningful effect.”

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