Charitable giving to higher education is an investment, not a scam

In a recent op-ed, “The War of Philanthropy,” Karl Zinsmeister defends the importance of charitable giving and its role in building “institutions of civil society that provide valuable services, alleviating many pressing public problems” — institutions which include those in higher education.  

American universities and colleges certainly provide valuable services. They offer access to greater life and career opportunities and a pathway out of poverty. They prepare students not just for good careers but also for lives of substance and meaning.

Additionally, they conserve and pass down the body of knowledge upon which civilization rests. And to make these things possible, charitable giving has been an essential part of the operating budget for higher education for more than 100 years.

On the eve of the United States’ entry into World War I, Congress increased the lowest tax rate from 1 to 2 percent and introduced the federal estate tax and other taxes on businesses. At the time, there was concern that U.S. charities, particularly colleges and universities, would not survive the war. Thus, Congress approved the War Revenue Act of 1917, which authorized the first tax deduction for charitable giving.

But Congress is now considering legislation to limit or eliminate the charitable gift tax deduction “to higher education institutions before or during the enrollment of a child” in response to the recent college admissions scandal. Such legislation is shortsighted and would damage the institutions it claims to protect.

The institution I serve is among the country’s elite, private universities. But we are far from elitist. Fordham University’s endowment is approximately $800 million; the percentage of our students who are eligible for Pell grants – that is, students from low-income families – has been around 20 percent for decades.

Our annual financial aid budget exceeds $200 million (more than 27 percent of our budget), enabling 90 percent of our undergraduate students to receive some sort of aid. But this level of financial aid is only possible with the support of parent and alumni giving, which typically generates $55 million in cash each year, most of which is earmarked for financial aid and spent the following year. In other words, charitable giving by the parents of current Fordham students does far more to support students other than the donors’ children.

Having spent most of the past three decades working with wealthy donors, I have seen time and again that most people who make gifts to higher education have multiple motivations: An investment in the future; a desire to do good; gratitude for an education they or someone in their family has received or is receiving; a desire to address a societal problem (e.g., mitigating the demise of a classical liberal education); and demonstrating their support for an institution’s mission and leadership. And, of course, they expect (and deserve) a tax deduction for supporting institutions critical to a well-functioning society. 

Congress’s impulse to limit or eliminate the deduction for charitable giving to higher education would likely have some negative impact on university budgets. The proposed legislation is an overreaction in the name of fairness, and one that would disproportionately punish deserving students who could not afford college without significant financial aid. 

The legislation would also undermine higher education – public and private – in response to an admissions scandal only tangentially related to charitable giving. Such legislation would actually harm the country and make the American dream harder to achieve for the two million young people who enter an American institution of higher education for the first time each year. 

In 1917, elected officials had the foresight to enact the uniquely American legislation that authorized tax deductions for charitable giving, preserving and rewarding philanthropic efforts to improve society. Our current elected officials should reflect on the wisdom of that 1917 vote. Our American higher education system is depending on it for continual investment and renewal.

Roger A. Milici, Jr. is vice president for development and university relations at Fordham University.