Congress Eyes Impact of Tax Breaks on Rising Tuition Costs

Congress Eyes Impact of Tax Breaks on Rising Tuition Costs

The House Ways and Means Oversight Subcommittee held a hearing Wednesday examining the rising costs of higher education and tax policy, including how tax breaks could be a contributing factor behind spiraling tuition costs.

“Today we’re here to look at what’s behind the rising cost of college, and to consider whether this nation’s tax policies are partly to blame,” said House Ways and Means Oversight Subcommittee Chairman Peter Roskam, R-Ill., in his opening statement.

The hearing considered tax breaks for college administrator salaries and endowments, along with other factors such as how increases in federal financial aid and tax credits for students may be encouraging schools to raise tuition. The high salaries of some university presidents and sports coaches also raised eyebrows.

“For nonprofit institutions, it seems like a lot of university presidents are making very good money,” said Roskam. “In 2013, 42 private college presidents made more than $1 million. One way schools can justify their compensation as ‘reasonable’ to the IRS for the purpose of favorable tax consideration is to show that similarly situated institutions pay comparable salaries to their executives. That method points in only one direction: up. It allows schools to increase their compensation year after year because others are doing it too. I’m not against people succeeding, by any means, but this is another area that’s important for our subcommittee to consider—are the highest paid college and university presidents the ones providing the best education for students? And if not, why not? How does tax policy fit into that math?”

The hearing also probed tax breaks for college endowments. “Endowments and their investment earnings are exempt from taxes,” said Roskam. “Congress provides that exemption to further a charitable purpose: better educating our nation’s students, preparing them for successful careers, and increasing the store of human knowledge through research. We understand that endowments can help assure financial stability to schools. But about 90 schools have endowments of more than $1 billion. Some of those schools have made great strides in providing exceptional financial aid to their students. Others have not.” Read more on Accounting Today.