Colleges Tax-Exempt Status Needs to Be Re-Evaluated

July 20, 2020
Paul Vancea

Exploring Financial Strategies and Economic Insights

This blog addresses the contentious issue of the tax-exempt status of colleges and universities, questioning whether these institutions continue to serve the public good sufficiently to justify their significant tax benefits. It explores the origins and purposes of granting tax-exempt status to educational institutions, primarily focused on promoting access to education and furthering public service. The blog critically examines how some colleges have diverted from these foundational goals, accumulating substantial wealth in the form of endowments while increasing tuition fees and reducing accessibility for lower-income students. It argues that the tax-exempt status of such institutions should be revisited, suggesting criteria based on affordability, the socioeconomic diversity of the student body, and the actual employment outcomes of graduates as measures of public benefit. The blog calls for a reevaluation process that would hold educational institutions accountable for contributing positively to society. By advocating for policy reforms, the blog underscores the need for a more equitable education system that aligns more closely with the original public-serving rationale behind tax exemptions.

As COVID-19 disrupts virtually all aspects of society, it forces us to reinvent our institutions that serve us. One of the biggest impacts COVID-19 had on our education system is to expose the flaws of the US college system, and the overwhelming negative consequences it has on our country and our citizens.
Most people do not know this, but most of our colleges and universities enjoy the benefits of a 501©3 organization, which makes them tax-exempt. The reasoning for the tax-exempt status of these institutions is based on the expectations that they benefit our society through the following:

Educated citizenry essential to democracy
Highly educated, skilled, and productive workforce – critical to a nation’s competitiveness
New Innovations and technologies that improve our quality of life, strengthen our security, and fuel economic growth

The above might have been true a few decades ago, but it does not describe reality anymore.

Our students are not educated anymore – they are indoctrinated. The average ratio of liberal to conservative faculty at most educational institutions is 17-1. There is no real diversity of thought, and if someone dares disagree with liberal logic, they risk being ostracized. Most students come out of colleges with tangible hatred for the United States and a noticeable misunderstanding of the capitalistic system that advanced our world, technologies and economies to where we are today. A quick search on Google will produce millions of results detailing the myriad of times conservative personalities were boycotted and banned from appearing at universities in schools. There is little to no freedom of thought: adhere to the liberal logic, or there will be consequences.
Most colleges and universities teach a highly outdated curriculum, in a highly outdated way. Our students graduate highly educated in terms of classes and degrees, but with little relevant skills for our current economy and business environment. First, most colleges/universities must constantly update their curriculum to stay on top of the latest progress in the marketplace, which is virtually impossible under the current educational system. Second, most curriculums must take advantage of technology, and its speed and computational capacity. Most degrees should not take 4 years. They could easily be learned by students in 18 months with a laptop and Wi-Fi connection. As a society, we must seriously question whether colleges/universities create a productive workforce anymore.
Our higher education system is supposed to contribute new innovations and technologies that improve our quality of life, strengthen our security and fuel economic growth. Again, this is no longer true.Instead of strengthening our security and fueling economic growth, the student debt colleges burden our students with acts like a cancer on our society, slowly paralyzing our young people and their drive for a better life. Instead of graduating college ready to take on the world and achieve their dreams, our students graduate, move in with their parents and feel lucky to get a job that allows them to pay back their student debt over one or two decades.

Because of these reasons, most universities and colleges should no longer enjoy the tax-exempt status of a 501©3 organization. They no longer meet the standards. Their net externalities to society have turned negative and no longer serve our nation’s best interests.

Instead of using their resources to reinvent the higher education system to serve our students and enable them to drive our nation to prosperity, colleges and universities are creating a generation of overly educated, debt-ridden hopeless citizens. They must be put under scrutiny and forced to explain why they should enjoy financial benefits at the expense of the taxpayer, when they no longer serve our country and citizens.

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