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Endowment Tax Proposal Worries Illinois Wesleyan University President

Exterior of Hansen Student Center
Cristian Jaramillo
/
WGLT
The Illinois Wesleyan University campus in Bloomington.

Illinois Wesleyan University’s president said Thursday that a plan to tax college endowments as part of a larger tax overhaul would unfairly harm private schools and make them less affordable.

The House GOP version of the tax reform bill unveiled last week in Washington included a new 1.4 percent excise tax on investment income earned by college endowments. Initially it targeted schools with private endowments valued at $100,000 per full-time student. That has since been raised to $250,000—meaning fewer schools would be impacted—although the bill is still in flux.

Illinois Wesleyan has 1,648 students this fall and an endowment of more than $200 million, meaning it would be impacted by the $100,000 threshold, said IWU President Eric Jensen. IWU draws 5 percent in income off that endowment for scholarships, helping fund $25,000 in average scholarships per student per year, Jensen said. Last year, that helped bring IWU’s average net tuition for a new student down to $21,000—well below the $46,000 sticker price.

“There’s a picture of an elite unaffordable institutions that are hoarding their resources. In our case, nothing could be further from the truth,” Jensen said. “It’s an unfair characterization.”

IWU does not currently pay any taxes on its investment income from the endowment, he said.

"All of these are disincentivizing the process of getting a higher education degree."

Jensen also raised concerns about a provision in the House GOP bill that would no longer allow faculty and staff to exclude from their taxable income any tuition breaks they (or their children) receive while pursuing a degree. That’s a major recruiting tool for IWU, which can’t pay faculty as much as larger research institutions or corporate competitors in Bloomington-Normal, Jensen said.

“All of these are disincentivizing the process of getting a higher education degree,” Jensen said on GLT's Sound Ideas.

Illinois State University is also closely monitoring the tax reform proposals, which could also mean an increase in taxes for graduate students and for those paying off student loans. Should those provisions be enacted, they could place an extra financial burden on students, said ISU spokesperson Eric Jome.

“For some students that could mean the difference between obtaining a degree and not. Because Illinois State places a high value on quality graduate education, the potential implications of the current tax overhaul proposal are worrisome,” Jome said.

“Illinois State’s leaders, along with the leaders of other colleges, universities, and higher education advocacy groups, are in contact with Congressional lawmakers to voice concerns about the myriad potential impacts on higher education. Illinois State will continue to monitor this tax proposal and will provide updates to employees and students regarding any legislation that is enacted into law,” he said.

U.S. Rep. Rodney Davis, R-Taylorville, has expressed support for many provisions in the House GOP version of the bill. But he too raised concerns about its impacts on higher education, calling for his colleagues to “retain the exclusion of qualified tuition reductions from income that many university employees and graduate students in the 13th District use.”

“That building services or mid-level clerical worker who has worked the same job at the university for 20 years just to afford a college education for their kid or the many graduate assistants teaching in exchange for tuition should be taken into consideration when discussing the qualified tuition reductions,” Davis said in a statement this week. “I’m urging my colleagues to take a second look at eliminating this exclusion. Now is the time for all Democrats and Republicans to engage in the process and provide input on one of the most important bills we will ever work on in Congress.”

IWUjensen-long.mp3
Listen to the full interview

Ryan Denham is the digital content director for WGLT.
WGLT Senior Reporter Charlie Schlenker has spent more than three award-winning decades in radio. He lives in Normal with his family.