Contributions to Higher Ed Aren’t Charity

On the surface, donating to a college to promote higher education appears to be a worthy cause.  The nation wants and needs a more educated workforce, higher paying jobs, and higher tax revenue. That all sounds great, let’s do our part while receiving a write off come April 1st.  Everyone wins? No. Very few win, and our nation loses.

Economic inequality continues to increase and divide the nation. In our post-industrial society securing full time employment that will support a middle-class family is increasingly difficult. Education is often indicated to be the highest predictor of financial stability and success, yet according the Census Bureau only 1/3 of those 25 and older in the U.S. have a bachelor’s degree.  

The policy goal of allowing charitable contributions to education to be deducted from gross income is to promote and support higher education for the betterment of future generations and society in total. While this is clearly a worthy goal of government policy, the use of this tax break to attain it is flawed and does more to widen the gap of economic inequality than it does to close it. With some exceptions, tax expenditures favor the wealthy more than the middle and lower class simply by design. This is largely due to the progressivity of the U.S. tax brackets; someone in the 35% bracket writes off a lot more than someone in the 15% bracket, so the contribution they make costs them less, but when it comes to charitable contributions to education, this favoring of the wealthy becomes even more profound. This is because of where contributions to education are directed. Money Magazine reported in 2015, $40.3 billion was donated to higher education. Of that approximately 29% went to twenty well known, well-heeled colleges like Stanford, Harvard, USC, and Duke. These schools are not the most in need of additional tax dollars.  The students attending these schools are not the most in need of public resources to achieve a college education. It is predominantly the wealthy, and the children of the wealthy who are benefitting from this tax break.  

By way of comparison let’s look at two California institutions.  The college that received the most in donations in 2015 was Stanford, receiving $1.6 billion. The Public Policy Institute of California reported that in 2004 all 113 of the community colleges combined (in CA) received $8.3 million; adjusting for inflation at 3% per year, Stanford still received 133 times that amount. The difference is so astounding I barely show it on a bar chart.

stacygraph


Dollar amounts based on worth of total gifts and contributions. California community college figures adjusted for inflation.

A country that provides equality of resources to all its citizens is truly a worthy cause. By eliminating this tax break and redistributing these federal dollars we could help close the gap of economic inequality and strengthen our local communities.

Stacy Martinez is a 2nd-year MPP student at the College of William & Mary and is an Associate Editor of the William & Mary Policy Review. 

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