Don’t reform taxes on the backs of students

• The tax reform bill in Congress is bad policy and will undercut financial aid for college students.
• Nicholas S. Zeppos is chancellor of Vanderbilt University.

A young woman working at NASA making space travel safer for astronauts. A young man from a small rural town who became a doctor. A new student training to be a teacher, just like the single mother who raised her. 

These are just a few examples of the many individuals whose Vanderbilt University education was made possible by financial aid — aid that is currently under attack by Congress in the name of tax reform.

At Vanderbilt, we are proud to offer an affordable, accessible education to all qualified students, regardless of their ability to pay.

More than 70 percent of this year’s freshman class receives financial aid, thanks in large part to Opportunity Vanderbilt, a program we launched in 2008, despite the economic downturn, to meet 100 percent of students’ demonstrated financial need without loans.

That gamble is paying off. Our new class is our most diverse and academically accomplished ever, and brings together future leaders from around the country and around the world. 

Our endowment proceeds help make Opportunity Vanderbilt possible. We spend approximately $270 million on student financial aid each year, of which the endowment funds one-third. Our endowment consists of about 2,500 individually endowed funds – in other words, a collection of generously donated funds from our supporters who believe in the transformative power of higher education. We invest those funds and use the returns to support students in need.

Now these efforts are under assault from the federal government. The tax reform bill approved recently by the House, like the one pending in the Senate, aims to siphon off endowment proceeds from universities and redirect them to government coffers.

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Under both plans, Vanderbilt would lose about $7 million a year in endowment proceeds – the equivalent of full-ride scholarships for 104 students. This is fundamentally bad policy and will undercut financial aid efforts at universities around the country. 

But the damage may not stop there. Provisions in the House legislation could also make it more expensive for students to pursue post-secondary education, particularly graduate students.

The House bill also eliminates a provision allowing universities to provide tax-free tuition reimbursements for dependents of employees. In contrast, the Senate bill rightly retains these benefits, although the uncertainty about where lawmakers ultimately will land on these issues is troubling. 

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Restraining the research, discovery and innovation happening at American universities and colleges is incredibly short-sighted and counter-productive. Institutions such as Vanderbilt develop cures and technologies that improve lives and provide economic boons to their communities.

In 2015-16 alone, Vanderbilt and the Vanderbilt University Medical Center contributed $9.5 billion to the Tennessee economy, generating 63,500 jobs. Together, the university and medical center constitute the largest private employer in the Nashville region – and the second largest private employer in the entire state.

America’s higher education system is the envy of the world and a major economic driver – why handcuff it with unnecessary tax regulation? 

Viewed through a wider lens, this tax package has even deeper implications. It is an unprecedented government intrusion into, and taxation of, nonprofits. Once that door is open, it will be hard to close. 

Independent, nonprofit universities achieve their missions in part through a long-standing partnership with the federal government, which includes provisions of the tax code that support students, employees, donors, and operations.

The proposed tax reform plan would jeopardize and fundamentally alter this partnership.

This bill is a tax on our students, a tax on families, a tax on our workforce, and a tax on the charitable mission of higher education. It will put a stranglehold on the aspirations of future college applicants and stall the future of our country.

Congress is proposing to ease the tax burden today by curtailing opportunities for tomorrow’s innovators and entrepreneurs—not to mention prospective doctors, teachers, NASA engineers, and countless other young people shooting for the stars.  

It’s a trade-off that is not in America’s best interest. We can and must do better.

Nicholas S. Zeppos is chancellor of Vanderbilt University.