They Miss The Point

Ingrid Jacques at USA Today:

Money talks.

That’s the message coming loud and clear from the country’s universities, as they respond to demands from the Trump administration to strip “diversity, equity and inclusion” efforts and antisemitism from their campuses.

College administrators who might otherwise have rolled their eyes at such demands are paying attention now that their federal funding – provided by taxpayers – is on the line.

But it isn't just DEI:

The Trump administration has suspended several dozen federally funded research grants to Princeton University as part of its investigation into campus anti-Semitism, according to a Princeton University email published by the Daily Princetonian student newspaper.

The email, dated April 1 and sent to the campus community by university President Christopher Eisgruber, said the university received the notification from the funding agencies, including the Departments of Energy, Defense, and NASA.

. . . Eisgruber’s email said more information would be released following conversations with affected faculty, researchers, and grant managers.

Princeton is among the 60 elite higher education institutions currently under federal investigation for the harassment of Jewish students following Hamas’s attack on Israel on Oct. 7, 2023.

Elsewhere,

The Trump Administration has officially put Harvard University on notice that it must change its policies on everything from wearing masks to admissions, or it will lose federal financial support.

Unlike the administration action cutting off Columbia University from about $400 million without options for adjusting policies, the government letter to Harvard this week gives Harvard the choice to adhere to government demands without an immediate cutoff, reported The Hill.

The Trump administration began the process of reviewing colleges and universities and taxpayer-provided financial support less than two weeks after President Donald Trump was inaugurated to serve a second term. Trump's Executive Order on Jan. 29 zeroed in on incidents of campus protests and specifically mentioned "Measures to Combat Campus Anti-Semitism."

. . . On March 31, the administration posted that it had opened a direct policy and funding review of Harvard.

This week's communication from the administration to Harvard does not specify the length of time Harvard is allowed to implement and begin enforcing the required policy changes.

Nor is it just elite universities:

The Bill and Melinda Gates Foundation and two other nonprofit organizations have come under fire for allegedly implementing scholarship and career advancement programs that discriminate against white Americans, potentially violating federal law and jeopardizing their tax-exempt status.

The American Alliance for Equal Rights (AAER) reported three organizations, the Gates Foundation, the Lagrant Foundation, and the Creative Capital Foundation, in letters to the IRS, claiming the nonprofits have “intentionally” discriminated against white people.

These cases of discrimination, AAER says, constitute “sufficient grounds” for the IRS to revoke the tax-exempt statuses of these three organizations.

. . . The Gates Foundation, AAER says, is “intentionally discriminating against white students by excluding them from the tuition assistance and specialized support that it provides to students of every other race or ethnicity.” The foundation’s Gates Scholarship states that the program is a “highly selective, last dollar scholarship for outstanding, minority high school students” before listing acceptable racial and ethnic backgrounds in its eligibility requirements.

A 2022 video advertising the Gates Scholarship reaffirms that only “low-income, minority students” are eligible. The program is only open to students who are “African American, Hispanic American, Asian American, or Native American.”

The complaints about both elite universities and charitable foundations actually put equal stress on both DEI and anti-Semitism, and even before the age of DEI, Alan Dershowitz in his 1991 Chutzpah pointed out that selective universities stressed "diversity" in their admissions policies by, for example, favoring applicants from outside the Northeast, which had the effect of excluding Jewish applicants from the Northeastern cities and suburbs. DEI simply continued the same policy under a slightly different guise.

But even that, it seems to me, isn't the whole story. In Thursday's post, I returned to Ferdinand Lundberg's The Rich and the Super-Rich, where he discussed both charitable foundations and university endowments as byproducts of the income tax, which was made constitutional in the 16th Amendment to the US Constitution:

The Sixteenth Amendment (Amendment XVI) to the United States Constitution allows Congress to levy an income tax without apportioning it among the states on the basis of population. It was passed by Congress in 1909 in response to the 1895 Supreme Court case of Pollock v. Farmers' Loan & Trust Co. The Sixteenth Amendment was ratified by the requisite number of states on February 3, 1913, and effectively overruled the Supreme Court's ruling in Pollock.

. . . For several years after Pollock, Congress did not attempt to implement another income tax, largely due to concerns that the Supreme Court would strike down any attempt to levy an income tax. In 1909, during the debate over the Payne–Aldrich Tariff Act, Congress proposed the Sixteenth Amendment to the states. Though conservative Republican leaders had initially expected that the amendment would not be ratified, a coalition of Democrats, progressive Republicans, and other groups ensured that the necessary number of states ratified the amendment. Shortly after the amendment was ratified, Congress imposed a federal income tax with the Revenue Act of 1913.

As Lundberg points out, although charitable foundations existed before 1913, both they and university endowments became effective ways to conceal and shelter stock ownership after the advent of the income tax. Wealthy families could donate corporate shares to the non-profits and universities while continuing control over those stocks via their membership on the non-profit and university boards, which followed because of those same major donations. In effect, this was the plutocratic response to the progressive policy innovation, and as part of the package, it incorporated other plutocratic predilections like anti-Semitism.

As I've been noting, a feature of the Trump paradigm reset is removal of multiple legs of the stools on which particular problems sit. He approached the migration problem both by closing the border and canceling funding to the NGOs that enabled the migration. He's approaching the dual problem of DEI and anti-Semitism, of which elite universities are and have been bastions, by threatening the federal part of their funding. It looks as if a further step will be to threaten federal funds to charitable foundations on the same basis.

Another factor in the Republican agenda will be to tax elite university endowments:

Washington insiders believe it is very likely that a significant increase in the tax rate on university endowment income will be enacted this year. They cite the need for additional tax revenue to offset the Trump tax cut agenda and the antipathy of many Republicans to what has been happening on campuses for the last two years. They also focus on the fact that then-Senator JD Vance introduced a bill in the last Congress imposing a 35 percent tax on endowment income.

Existing law imposes a 1.4 percent tax on endowment income of private universities that have endowments of $500,000 or more per student. The type of tax that might be considered in the current Congress is exemplified by a bill, H.R.446, the Endowment Tax Fairness Act, introduced by Congressman Nehls (R-TX), which raises the current 1.4 percent tax rate to 21 percent. The 21 percent is the same as the tax rate imposed on corporate income. Another bill, H.R. 1128, introduced by Congressman Lawler (R-TX), increases the rate to 10 percent, but it also greatly increases the number of schools covered by including private colleges and universities that have endowments of $200,000 or more per student.

But yet another leg of the stool on which university endowments sit is the income tax itself. Trump's long-term agenda, which is likely to outlive both him and his presidency, is either to reduce or completely eliminate the income tax. This will simply remove a major reason for the existence of university endowments and charitable foundations at all. Many people don't seem to understand the breadth of Trump's agenda, just part of which will be to reduce the prestige of the universities and, as just one result, to mark the value of a university education to market.