The Tax Cuts and Jobs Act imposed a new, unprecedented 1.4 percent excise tax on net investment income for private colleges and universities with endowment and other assets (other than those used directly in carrying out the institution’s educational purposes) valued at the close of the preceding tax year of at least $500,000 per full-time student. The so-called “endowment excise tax” is in fact a tax on charitable resources used for student scholarships, research, and other activities that are consistent with the tax-exempt, educational mission of universities."
It doesn't solve the a priori issue of "Charity is assigned through failure to pay sticker prices and also we fix prices" but it does put some pressure to add students (or decrease reported value of assets lol.)
Ha, I HATE doing advocacy or even making my own opinions legible. But perhaps down here in the comment section on a 5+ year old essay I can afford to be more clear.
My view after writing this essay is that the entire category of "nonprofit" should be abolished for ALL use cases. Obviously this is a non-starter in any sufficiently democratic system that's been running such a category for half a century -- the accumulated special interests & moral posturing create too much inertia to ever overcome. But OpenAI is exactly correct to exploit this system, and it's only excess timidity that stops others from doing the same.
A question I always put to people over drinks who launch instinctive objections: "who has done more good for the world? [Moderna]? Or [nonprofit]?" With "Moderna" & "nonprofit" subbed to targets maximally likely to cause the other person to stop a second and go...yeah, you know what, that is pretty odd that people can pull $400k salaries down at "nonprofits" that do less good for the world than a raw capitalist enterprise.
The subsection of this essay that critiques "The Case for Charity: A Charity Case" is intended to generalize to many other such cases. Ultimately any "charity" whose directors extract money from the entity, even a "mere" living wage, even mere "partial wages", is in my mind a perversion of tax law and a suboptimal redirection of economic surplus. Obviously this is controversial, but note that I'm NOT objecting to a "welfare state" or "UBI" or any other redistributive mechanism in principle -- only the endless grifting BS built up over half a century of faux-non-profits each adding middleman taxes onto a system and providing sinecures, social status, & political power to people who are unworthy of it.
Our tax code already provides an excellent way for businesses to not get taxed: don't make a profit at the end of the year.
Who would you rather get taxed? A niche family business servicing a local economy's regional needs in some specialized field and providing jobs & a living for 5 extended family members plus 4 non-family staff? Or a highly partisan think tank that pays overeducated undercapable wordcels to churn out propaganda for their side in the eternal Culture War?
If we HAD to have a "nonprofit" category, I know who I'd pick.
Ultimately, the designation itself is a marker of "class", especially in America where social class is almost entirely derived from labor. Some people's labor is considered sacred & beyond even the iron claws of Uncle Sam. Others get tagged as kulaks at the organizational level and no amount of positive externalities their labor provides can ever offset the original sin of their business.
It'll never get fixed, which is why I feel comfortable talking about it even here. The left hate the $300 billion dollar churches that shape regional democratic politics, but will either bury or convert anyone who tries to touch their college endowment funds. The right resents the media apparatchiks & NGOs that co-opt all modern mass media, but would never be willing to sacrifice its own mirror organizations to the cause -- their resentment stems from being weak, not any actual principle.
Such is life. Sorry for the long response but just expanded on my own thoughts a bit more candidly here.
Apologies for breaking your M.O.! There's got to be nothing worse than an anon subscriber who wants your dramatic reveal on something you wrote five years ago, but with a percent sign. I'm a second- or third-level reply guy, I'm working on it.
To make it even: When I found your blog I was hot off the heels of being ripped off by a minor office in my university. I've gradually gone from "Will rant about this, curse the 'Student Life' division, and drop the Conrad link" to "Will rant about this, drop the Conrad link, and explain that if we're going to do lords and peasants the lords should at least not charge tuition." A few med schools have done this, and although I think it's pretty terrible and they will probably require constantly being cajoled into accepting five students a year, we can at least cajole them on that metric and save everyone else their money. Make tuition a full-tax deduction, or some similar scheme for the layfolk. Alas, layfolk don't get schemes.
Thanks for defending us B school grads. Humanities majors and university admins won't believe it, but we're just innocent men.
"if we're going to do lords and peasants the lords should at least [_____]" really does describe much of my personal worldview lol.
Insert "be worthy / be fair / operate according to principles of maximizing the total pie / not charge tuition while getting tax free profit centers" etc.
I learned this today, even though this essay was formational when I read it in Jan 2019:
https://www.aau.edu/key-issues/tax-exempt-status-universities-and-colleges
"2017 Tax Law Change
The Tax Cuts and Jobs Act imposed a new, unprecedented 1.4 percent excise tax on net investment income for private colleges and universities with endowment and other assets (other than those used directly in carrying out the institution’s educational purposes) valued at the close of the preceding tax year of at least $500,000 per full-time student. The so-called “endowment excise tax” is in fact a tax on charitable resources used for student scholarships, research, and other activities that are consistent with the tax-exempt, educational mission of universities."
It doesn't solve the a priori issue of "Charity is assigned through failure to pay sticker prices and also we fix prices" but it does put some pressure to add students (or decrease reported value of assets lol.)
A tax we need to raise? Drop 500k to xk?
Ha, I HATE doing advocacy or even making my own opinions legible. But perhaps down here in the comment section on a 5+ year old essay I can afford to be more clear.
My view after writing this essay is that the entire category of "nonprofit" should be abolished for ALL use cases. Obviously this is a non-starter in any sufficiently democratic system that's been running such a category for half a century -- the accumulated special interests & moral posturing create too much inertia to ever overcome. But OpenAI is exactly correct to exploit this system, and it's only excess timidity that stops others from doing the same.
A question I always put to people over drinks who launch instinctive objections: "who has done more good for the world? [Moderna]? Or [nonprofit]?" With "Moderna" & "nonprofit" subbed to targets maximally likely to cause the other person to stop a second and go...yeah, you know what, that is pretty odd that people can pull $400k salaries down at "nonprofits" that do less good for the world than a raw capitalist enterprise.
The subsection of this essay that critiques "The Case for Charity: A Charity Case" is intended to generalize to many other such cases. Ultimately any "charity" whose directors extract money from the entity, even a "mere" living wage, even mere "partial wages", is in my mind a perversion of tax law and a suboptimal redirection of economic surplus. Obviously this is controversial, but note that I'm NOT objecting to a "welfare state" or "UBI" or any other redistributive mechanism in principle -- only the endless grifting BS built up over half a century of faux-non-profits each adding middleman taxes onto a system and providing sinecures, social status, & political power to people who are unworthy of it.
Our tax code already provides an excellent way for businesses to not get taxed: don't make a profit at the end of the year.
Who would you rather get taxed? A niche family business servicing a local economy's regional needs in some specialized field and providing jobs & a living for 5 extended family members plus 4 non-family staff? Or a highly partisan think tank that pays overeducated undercapable wordcels to churn out propaganda for their side in the eternal Culture War?
If we HAD to have a "nonprofit" category, I know who I'd pick.
Ultimately, the designation itself is a marker of "class", especially in America where social class is almost entirely derived from labor. Some people's labor is considered sacred & beyond even the iron claws of Uncle Sam. Others get tagged as kulaks at the organizational level and no amount of positive externalities their labor provides can ever offset the original sin of their business.
It'll never get fixed, which is why I feel comfortable talking about it even here. The left hate the $300 billion dollar churches that shape regional democratic politics, but will either bury or convert anyone who tries to touch their college endowment funds. The right resents the media apparatchiks & NGOs that co-opt all modern mass media, but would never be willing to sacrifice its own mirror organizations to the cause -- their resentment stems from being weak, not any actual principle.
Such is life. Sorry for the long response but just expanded on my own thoughts a bit more candidly here.
Apologies for breaking your M.O.! There's got to be nothing worse than an anon subscriber who wants your dramatic reveal on something you wrote five years ago, but with a percent sign. I'm a second- or third-level reply guy, I'm working on it.
To make it even: When I found your blog I was hot off the heels of being ripped off by a minor office in my university. I've gradually gone from "Will rant about this, curse the 'Student Life' division, and drop the Conrad link" to "Will rant about this, drop the Conrad link, and explain that if we're going to do lords and peasants the lords should at least not charge tuition." A few med schools have done this, and although I think it's pretty terrible and they will probably require constantly being cajoled into accepting five students a year, we can at least cajole them on that metric and save everyone else their money. Make tuition a full-tax deduction, or some similar scheme for the layfolk. Alas, layfolk don't get schemes.
Thanks for defending us B school grads. Humanities majors and university admins won't believe it, but we're just innocent men.
"if we're going to do lords and peasants the lords should at least [_____]" really does describe much of my personal worldview lol.
Insert "be worthy / be fair / operate according to principles of maximizing the total pie / not charge tuition while getting tax free profit centers" etc.