Economics
Facing First Tax on Endowments, Colleges May Be Set to Dodge It
- Harvard, Yale are among some 30 schools set to pay 1.4% tax
- Universities may find ways to circumvent law, study says
Photographer: Kevork Djansezian/Getty Images
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Private colleges facing a new endowment tax may “behave strategically” to avoid paying it, according to a study published Thursday by a senior researcher at the Federal Reserve Bank of Cleveland.
Schools may increase enrollment -- or give the appearance of doing so by changing the way they measure it -- to reduce their endowment-per-student ratio to miss the tax threshold set by Congress, wrote economist Peter Hinrichs. Those colleges with low enrollment may reduce it in order to stay below 500 students to avoid the tax.