Bowdoin President Clayton Rose and forty-eight other college and university presidents have sent a letter to Congress asking members to repeal or amend a new excise tax on endowments that was included in tax reform legislation passed in December.
Addressing both Republican and Democratic lawmakers, the college and university presidents call the tax “unprecedented and damaging” because “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.”
In the letter, they explain that endowments are not “rainy day” funds held in reserve but rather provide crucial annual funding “to help students, improve education, expand the boundaries of knowledge, advance technological innovation, and enhance health and well-being.”
Approximately 50 percent of the Bowdoin endowment is restricted by donors for the support of need-based financial aid, with the distribution funding approximately 74 percent of the College’s financial aid budget of $38.5 million for fiscal 2017-2018.
In a recent op-ed published in U.S. News and World Report, Rose argues that the endowment tax is not intended to raise significant resources for the government but is rather a statement by members of Congress who are motivated by “misguided ideas” about higher education.
“The education we offer changes the life trajectory of our students, and has made and continues to make America stronger,” writes Rose. As they have always done, Bowdoin and these other colleges and universities help “prepare students for success in their work, for thoughtful engagement in civic life, for lives of meaning, for lifelong learning, and for understanding our world and those with whom we live.”
And Rose argues that the institutions affected by the new tax are also increasingly making higher education accessible to the best students from all socioeconomic backgrounds by providing large financial aid packages made possible through endowment income.
“The irony of the new excise tax on endowments is that it drains financial aid funds from the very schools most able to offer opportunity to those who have earned a spot but cannot otherwise afford this education,” he points out.
Former US Senator George Mitchell of the Bowdoin College Class of 1954 expressed similar concerns in a March 2 op-ed published in the Boston Globe in which he calls the new endowment tax “unprecedented and self-defeating.” “This tax makes no sense,” writes Mitchell. “It hampers efforts to make college affordable for students who would be unable to attend without financial aid.”
Approximately thirty colleges and universities—including Bowdoin—are affected by the new excise tax on endowments, which applies to institutions with at least 500 students and assets valued at $500,000 per full-time student.