Tax universities? The unthinkable is now a live possibility. Congressional plans to tax the endowments of wealthy private schools and the tuition benefits of graduate students have elicited outrage from universities and schadenfreude from Trump supporters. Missing in this outcry — and in the pending tax legislation — is a recognition of the long history of reciprocity between academia and government that has incalculably benefited society.
The nation’s founders nourished great aspirations for higher learning and pined for a research university in the European mold rather than the British. John Adams and Thomas Jefferson were so desperate to do this that they considered transplanting Switzerland’s Genevan Academy wholesale to the nascent United States.
The economic and military demands of the Civil War finally presented the conditions for us to establish versions of a European-style university in America. To fund them, the government offered a quid pro quo in which universities were granted federal money and exemption from direct oversight in exchange for providing a service to society. The Morrill Act of 1862 charged the so-called land-grant universities to “promote the liberal and practical education of the industrial classes.”
The nationwide introduction of tax exemption for both private and public universities in the early-20th-century tax code formalized this reciprocity. The sad irony is that while political leaders fought hard for universities years ago, their latter-day counterparts now seek to dismantle them.
The deal between universities and government now on the table was negotiated in the years after World War II, when American pride in military victory commingled with anxiety over how to manage the stateside return of millions of soldiers. The result was the Servicemen’s Readjustment Act of 1944, popularly known as the G.I. Bill, which would eventually send more than two million veterans to college and remake the American class structure. In a single generation, college access was transformed from an option only for the affluent and a minority of industrious students into a broadly accessible avenue of social mobility.