Elite Universities Are Entrenching a Privileged Class. An Endowment Tax Can Fix That.

The tax has been attacked as cynical and pointless. In truth, it didn’t go far enough.

Students on the Yale University campus
Students on the Yale University campus (Shannon Stapleton / Reuters)

Conservatives aren’t terribly fond of America’s elite universities. Recent research from the political scientists Carlos X. Lastra-Anadón and Thomas Gift found that while liberals consider elite-educated politicians more competent than those with less illustrious pedigrees, conservatives find them considerably less appealing. Though liberals were just as inclined to back candidates educated at Ivy League universities as those who were not, conservatives were less likely to vote for Ivy Leaguers. It seems that President Donald Trump’s frequent boasts about having attended the elite Wharton School were, to conservative voters at least, less a draw than an obstacle to overcome. And that is as it should be.

Lastra-Anadon and Gift observe that Ronald Reagan was the last U.S. president not to have been educated at an Ivy League university, and that more than 40 of the 535 members of the 115th Congress have degrees from Harvard alone. The most recent Supreme Court confirmation battle drew attention to the egregious overrepresentation of Yale and Harvard law schools among the justices and the clerks who serve them, virtually all of whom then rise to the loftiest heights of the legal profession. Graduates of elite universities are overrepresented in countless other domains, from the arts to corporate management.

This is one reason their admissions practices are so politically fraught. If the composition of the student bodies of the Ivy League universities and their peer institutions were immaterial, there wouldn’t be such consternation over whether or not, say, Harvard discriminates against applicants of Asian origin. Rather, there is a widespread sense that the admissions decisions of ultra-selective colleges and universities are of great consequence, and that they ought to be scrutinized.

Nevertheless, I doubt that admissions are really the heart of the issue. Though a number of recent surveys have found that large majorities are opposed to allowing colleges to consider race in their admissions decisions, it is not at all obvious that race-blind admissions would bolster the legitimacy of elite higher education. The battle over racial preferences is, ultimately, a battle among people who share the premise that elitism in higher education is worth defending.

What, then, accounts for conservative wariness toward Ivy Leaguers? For one, many on the right see Ivy League universities and other similarly selective institutions as bastions of left-liberalism, where dissent from the right is tolerated only begrudgingly. Of course, one could argue that the leftism of the country’s most storied educational institutions has been exaggerated by activists looking to score points at the expense of the academy, or that the political enthusiasm of status-seeking young activists and the professors who gush over them can be safely dismissed as harmless posturing.

But even if we were to accept both of these objections as true, conservatives would still have good reason to cast a wary eye on the most richly endowed universities in the country: Their power and influence is unbefitting a democratic society. And more prosaically, it is not clear that these institutions are generating public benefits commensurate with the extraordinary public privileges they enjoy, including, most of all, their favorable tax treatment. These are, to my mind, the issues conservative critics of academic elitism ought to focus on—not racial preferences, which aim to make elitism more palatable, nor even the spread of leftist orthodoxy on elite campuses, which can be understood as a form of ritualistic self-flagellation by people who have no interest in surrendering their elite status, but rather the fact that we as a country are actively subsidizing institutions that, in their current form, have noxious spillover effects.

To defenders of America’s elite universities, the notion that they are anything other than the crown jewels of our stratified educational system amounts to sacrilege. Part of the reason is that many wealthy and influential Americans either are graduates of such universities, in which case they are invested in the idea that the imprimatur of these institutions is something of great value, or desperately want to enroll their daughters and sons in them.

And though these universities largely cater to the offspring of affluent families—as of the class of 2013, the median parental income of a Harvard undergraduate was $168,800—it must be said that they do make an effort to recruit students from more modest backgrounds. Though students from households earning $65,000 or less represent a small minority of Harvard undergraduates, they are offered full financial aid, and for good reason: They provide their better-off classmates with an education in how the other half lives, and for that they are compensated with a “free” education. It is these working- and middle-class young people who make the elite universities something other than finishing schools for the upper class, and who provide a fig leaf of legitimacy for their exclusivity. A cynic might say that these students serve the function of making the system seem just porous enough to pass as meritocratic. But does the fact that an elite education offers a small handful of young people from less-than-plutocratic origins a means of ascent justify their exalted status? I’m not so sure.

Until the postwar era, the United States stood out as one of the world’s most highly educated societies. Since then, we’ve been surpassed by a number of other market democracies, including Canada. One of the more striking differences between the U.S. and Canada is that while both countries enroll more than 60 percent of their high-school graduates in post-secondary education, and both are home to elite research universities that generate a great deal of valuable research, Canadian higher education is far more egalitarian. It is relatively rare for students to leave their home provinces to pursue their undergraduate studies, and the locus of competition is more within large public universities, where students vie to enroll in majors that might lead to more remunerative careers, than it is across universities.

The U.S., in contrast, has a far more hierarchical higher-education system, with a small number of selective private institutions at the top of the pecking order; a squeezed middle of less selective public institutions that offer instruction of reasonably high quality, though this sector finds itself under pressure from a combination of rising administrative expenditures, pointless positional competition with the elite institutions, and, arguably, public disinvestment; and a large, expanding universe of institutions that offer degrees of dubious quality at ruinous cost, the worst of which are not unreasonably described as predatory. All of the above are underwritten, to greater or lesser extents, by the federal government.

What are the consequences of these differences between Canada and the U.S.? One, as the economists Valerie Ramey and Garey Ramey have suggested, is that college-educated parents find themselves locked in a “rug-rat race,” in which an intensified, zero-sum competition for access to selective universities in the U.S. has led to increased expenditures of time and money. The less rivalrous nature of Canadian college admissions has led, it seems, to a more humane approach to middle-class parenting that is more compatible with an egalitarian ethic. At the same time, one could argue that higher-education elitism in America generates the aforementioned negative spillovers for millions of U.S. families, with parents warping their lives and those of their children in the forlorn hope of besting others very much like themselves in a mindless race for status.

And to what end? Does this ferocious competition elicit greatness from America’s youth, or does it drive grade inflation and differential diagnoses of learning disabilities that necessitate all manner of accommodation for the children of the well-off? Judging by PISA scores, a comparative assessment of educational outcomes, U.S. K–12 students fare far worse than their counterparts in comparably affluent market democracies, Canada very much included, on tests of literacy and quantitative reasoning. The zero-sum competition among high schoolers at the top does not appear to have boosted performance on average. As the economist Eric Hanushek recently observed, “If we were to close just half the gap between our students’ PISA scores and Canada’s, it would lead to long-run annual economic-growth rates that are almost 0.5 percentage points higher.” This is despite the fact that Canadian schoolers are not engaged in a sharp-elbowed battle to secure admission to their local equivalents of Princeton or Yale, as local equivalents simply don’t exist.

Granted, it is also true that Canada’s universities aren’t nearly as celebrated around the world as the Ivies. Dictators aren’t quite as keen to enroll their offspring at the University of Toronto as they are to send them to Harvard, as Xi Jinping, most notably, has done very recently. Stanford’s magnetism among Asia’s mega-rich far surpasses that of the University of British Columbia, the comparable beauty of its campus notwithstanding. Yet Canadian research universities have been holding their own. The University of Toronto, for example, has emerged as a leading center of research and business-model innovation around artificial intelligence. It turns out that Canada’s more inclusive and egalitarian public universities can, under the right circumstances, compete rather effectively with their elite—and elitist—counterparts south of the border.

Conservative anti-elitists would do well to take a long, hard look at America’s elite universities. In the Tax Cuts and Jobs Act, congressional Republicans included a controversial endowment tax aimed at higher-education institutions with endowments of more than $500,000 per student and with 500 or more tuition-paying enrollees, a narrowly tailored measure that richly endowed universities have made sport of avoiding through various sophisticated stratagems. This endowment tax has been attacked as cynical and pointless. My complaint is that it didn’t go far enough.

Ideally, an endowment tax would be designed in such a way as to encourage elite universities to become less elitist, much as a carbon tax is designed to curb pollution. What would this look like in practice? Aaron Klein and Richard V. Reeves, writing for the Brookings Institution, have suggested an exemption or reduction in the tax for universities that enroll at least one-third of their students from Pell-eligible households. In a related vein, my colleague Alia Wong has called for elite universities to enroll more students, and especially more first-generation and working-class students.

This would be a good start. So too would expecting them to support degree-granting programs accessible to a wider slice of the public. Kevin Carey of New America favors the establishment of a federal virtual university, which would offer competency-based credentials at low cost. Incumbent universities that partnered with such an institution ought to be treated more generously than those that failed to do so.

One can easily imagine other nudges designed to demonstrate the seriousness of a university’s commitment to breaking down the barriers to high-quality education. Over time, America’s elite universities might transform themselves into institutions exclusively devoted to basic research, a mission that unquestionably deserves taxpayer support in a democratic society, while leaving the care and feeding of ultrarich teens and 20-somethings to for-profit enterprises that could build their own Ivy-covered, ersatz-Gothic leisure palaces from scratch.

Not all universities will be willing to abandon their storied roles as finishing schools for the elite, which is fair enough. In a free society, private institutions should be allowed to go their own way, especially when they choose not to accept federal aid. But for those that do accept federal funds, the endowment tax will be there to keep them in check—and every cent of revenue should flow to Pell grants and other programs designed to promote upward mobility.

The project of repurposing the endowment tax as a tax on the entrenchment of class privilege may well be doomed. The mainstream center-left would, I suspect, denounce a program along these lines, as elite universities are as much a constituency of the Democratic Party as public-sector unions. The same probably goes for the mainstream center-right, which is no less susceptible to the siren song of prestige. Yet the rise of populism, of both the right- and left-wing varieties, has opened up new possibilities. A more vigorous anti-elitism in the realm of higher education just might be one of them.