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Tax Reform: First Do No Harm


Over the past two decades Tennessee’s private colleges and universities have worked hard to keep
college costs under control. As a result, tuition has nudged up about 2% per year versus the high single
digits and low double digits of the 1990’s. Campuses have implemented numerous cost controls, sought
alternative revenue sources, and cut unproductive programs, all while maintaining high quality
academic programs.

All of this has taken place to remain responsive to the needs of the students and families we serve. As
well, these actions are an answer to the call from lawmakers to slow the increasing cost of higher
education while providing access to the college that will make the student most successful.
Now Congress is entertaining tax reform options that threaten the financial stability of private nonprofit

There is a proposal to place a tax on private college endowments. The earnings from the endowments
provide student scholarships as well as funding for existing and new academic programs. Cutting this
revenue threatens to reduce scholarship aid to needy students and increase costs for academic
offerings. The current proposal being circulated appears to impact the endowments of Vanderbilt
University (Nashville), Meharry Medical College (Nashville), Rhodes College (Memphis), Sewanee-
University of the South (Sewanee), Johnson University (Knoxville) and maybe more over time.
For example, Vanderbilt University can provide a ‘no loan’ financial aid packages for students because
they use a portion of their endowment earnings to make attending Vanderbilt affordable. Johnson
University restricts funds for student scholarships that might be reduced due to this new taxation.
Student aid and academic programs are greatly enhanced through endowment earnings at Rhodes and
the University of the South, but now these enhancements are at risk. At Meharry Medical College, the
nation’s largest provider of minority doctors, the taxation may jeopardize the operation and expansion
of medical training of those doctors who work in high-need areas.

Contrary to conventional thinking, most faculty and staff at private colleges are paid well below their
public university counterparts. They choose to work at a private college because they want focus on
teaching and mentoring students in a smaller college environment. Consequently, campuses offer
family benefits to offset the low salaries. One such benefit is tuition discounts for employees and their
families. Congress is now considering taxing these discounts. This may hamper the ability of campuses
who serve low-income, first-generation college students to attract highly qualified faculty.
There are other benefits that support students and institutions that are targets of new taxation. Some
of these include removing the student loan interest deduction and crippling the IRA Charitable Rollover.
And the list goes on.

The first rule of tax reform should be: Do No Harm. Especially to those nonprofit organizations that are
providing services for the common good. Chipping away at the nation’s nonprofit higher education
institutions to fund tax reform can have devastating long-term consequences on our nation’s economy.
Congress should seek ways to bolster education opportunities, the future of our nation depends on it.

Dr. Claude Pressnell
Tennessee Independent Colleges and Universities Association
1031 17th Avenue South
Nashville, TN 37212