Private Universities Should Stop Wealth-Hoarding and Share

People do, zobroward. You just don’t hear about it when a well to do person funds a new library at Nowheresville College

And if you realize you are matching those donations 1.5 to 1 in practice? Actually it’s more since the income generated is not taxed either.

No one is “matching” a $50 million dollar donation 1.5 to 1. If you’re able to donate 1 or more million dollars, it’s likely funds coming from an estate (not taxable income) or long term capital gains income (and would be taxed as such and not as ordinary income).

If it comes from an estate you are matching 2 to 1 in stead of 1.5 to 1. Federal estate tax at 35%. For other contributions, you get to deduct contributions at your marginal tax rate. It is 1.5 to 1 if the donor is at 39.6% tax rate. We just finished this., setup a charitable trust. Let’s say you donate $100K in appreciated stocks, long term or short term. If you had an income of at least $100K, you get to deduct it from your AGI. Savings on the tax about $39.6K if your marginal rate is 39.6%. So the donor gave up $60K and taxpayers $40K. Actually, the donor gave up even less if stocks s/he gave up were not keepers and would have sold it anyway and pay long term or short term gains tax.

Or alternatively, everybody put in zero except the donor, because the tax rates are set with the knowledge that donations are tax-exempt in the first place.

RE: “Yes, it’s a big one. When Bill Gates set up a charity and fund it with 100 billion dollars instead of leaving it to his heirs, tax payers lose out on 40 billion dollars in estate tax alone. Are his causes so dear to you that you would happily fund a third of it with your money?”

YES! TOTALLY! For the simple reason that if that same money was in the hands of the government it would be absorbed in bureaucracy, paperwork, and political horsetrading that almost none of it would actually do any good. At least with Gates, I have confidence that the money will be spent well. Our government has no clue how to spend money well, just check the boxes on political show ponies.

People do donate to podunk Us all the time.

http://www.nytimes.com/1991/10/30/education/wealthy-couple-repays-alma-mater-51.4-million-to-university-of-houston.html

http://www.chron.com/sports/cougars/article/UH-gets-10-million-donation-toward-football-2122763.php

http://thedailycougar.com/2015/11/19/hofheinz-renovation-project-20-million-donation-announced/

If I ever hit it big, Podunk U will get the $ for sure! :frowning: Podunk U not holding breath!

Yale is laying off staff because its School of Medicine is losing $18 million, stemming from state Medicaid cutbacks.

http://wtnh.com/2016/05/05/yale-union-workers-rally-against-cuts/?google_editors_picks=true

It’s really tough for Yale to make ends meet. After all, 4% earnings on a $25 billion endowment is only a billion dollars per year.

Examples of colleges that have ~$15-30M endowments:
Bennington College
Colby-Sawyer
Southern NH

Big, “elite” universities are more likely to produce many rich alumni, some of whom are willing to donate large sums of money to their own alma maters. These gifts often are for specific purposes. For example, a few years ago, the Chairman and CEO of Morningstar, Inc. donated $25M to his alma mater, UChicago, to construct a new state of the art library building (http://mansueto.lib.uchicago.edu/overview.html)

What would happen at Bennington College if it suddenly was expected to manage a sum of money roughly equal to its current endowment? Bennington has no need for a library building to house 3.5M volumes (its Crossett Library holds fewer than 100K volumes). A $25M grant could cover approximately 77% of the tuition costs of all ~660 students currently enrolled in Bennington College, for one year. Would that use of the money result in better, more lasting effects than using it for a new library building at a major research university?

@tk21769,

If a college is struggling, the causes are often more than just a lack of money. Adding money without fixing the underlying causes is often just throwing good money after bad.

Maybe the people running the colleges with $15-$30M endowments should take the hint that that they aren’t that valuable to either alumni or prospective students. They either need to adapt or shut down.

In addition, one cannot raise value with money because value is calculated separate from money. Money does not impart value or raise the standards of anything; money only validates what people already believe, and in many cases, know.

Think of it this way - If you pay $5,000 for a $1,000 run-of-the mill used car, does the value of the car now rise to $5,000? No, it does not. Even if you gave it a new paint job and engine, the value will still hover at $1,000. It might go up a little, but you will lose 90% of the purchase price and the investment. Why? Because the value of the car is not based on the money spent on it; it is based on the fact that it is just a run-of-the-mill car.

Now, take a Ferrari, and spend $650,000 on a car that yesterday had sticker price of $500,0000. There is an extremely good chance that someone will, down the road, pay you $800,00 for the same car, which started out at $500,000. And he will pay this even after you have used it a bit and made no upgrades or anything. Why? Because the Ferrari is seen as valuable, and it is not a run-of-the-mill car.

Colleges are no different. Therefore, giving money to a college that has already been proved to have less value in people’s eyes will not raise its value; the gift will only waste the money, which could have gone to increase some other school’s value. The overall result is the gift expenditure is a net loss to the economy, as no real growth resulted from it.

An article on College Endowments. It has some good information on their diversification and links to Harvard and Yales endowment annual reports.

http://www.bloomberg.com/quicktake/university-endowments

If a person donate to a certain school, most of them do not want theie money to be spend freely. They not only donate to a certain school, they usually specify in great details how the money should be used. So, the schools have to disrespect all of this and chaneel the money somewhere else? Then donors will stop donating, as simple as that. The donors at least expect some respect in return to their donations. And there are many publics that are awash with private donations.