The scenic campus of Colgate University in upstate New York is enjoying more than a fresh coat of paint these days.
New buildings include the Robert H.N. Ho Science Center and the Trudy Fitness Center. The Case Library was refurbished and renamed, and includes the new Geyer Center for Information Technology. There’s also $142 million in the coffers for financial aid—all the fruits of a recent $480 million fundraising campaign.
Colgate cast a wide net. But like most big fundraising campaigns, particularly in higher education, the lion’s share came from wealthy benefactors rewarded in return with a combination of altruistic satisfaction, naming rights—and a big tax deduction.
Now that tax deduction may be in jeopardy, and some in higher education are worried.
Democrats want more tax revenue and Republicans are fighting increased tax rates. That means capping deductions for such things as mortgage interest and possibly charitable contributions will likely be part of any compromise.
Such an outcome would shed light on a question economists have long debated: How big a factor is that tax deduction in the decision to give to charity generally and in the globally unrivaled fundraising success of American colleges, which collected $30 billion in donations last year?
Colleges have particular reason for concern. Compared to charities such as religious or social service organizations, education gets a hugely disproportionate share of contributions from the well-off. It’s wealthier taxpayers who itemize and benefit most from deductions—the higher your marginal tax rate, the bigger the “discount” you get on your taxes for giving to charity. So incentives for the wealthy to donate less could particularly affect education.
