How Elite Colleges Rip Off Taxpayers

Yale University gets government handouts while paying little in property taxes.


Yale University has fancy dining halls. They pay no property tax.

Local restaurants struggle to compete, but their tax burden makes that hard.

"We basically pay one-third of our rent in taxes!" complains Matt West, manager of Koon Thai Restaurant. "Yale is a money-making machine."

It is. Many colleges are.

Yale has a $31 billion endowment. Harvard's is $40 billion. My alma mater, Princeton, has $26 billion.

Yet, these schools also get government handouts and tax breaks. How government rips off taxpayers and students by subsidizing colleges is the subject of my video this week.

Yale owns about a quarter of the town of New Haven, Connecticut, but the school pays little property tax. It even has a golf course that's half tax-exempt.

Politicians tried to tax the school, but they cannot.

"It's written into the constitution," complains New Haven Board of Alders President Tyisha Walker-Myers. "They just don't have to pay."

Now the city is ticketing more cars to try to cover its budget shortfall.

Everyone else pays more because colleges get tax breaks, government grants, and government loans.

"De-fund universities!" says Inez Stepman, senior policy analyst at the Independent Women's Forum. "Their entire business model is dependent on the taxpayer."

I push back: "You make it sound like it's all government money. But people pay their own way."

She corrects me: "Without that lifeblood of those federal student loans, very few universities would be able to operate. They are dependent on that federal interference."

They're dependent because they've raised their prices so much. When I went to college, my tuition was $1,950. Now, Princeton charges $53,890.

After government increased subsidies, colleges raised tuition prices at four times the rate of inflation.

They spend the money not just on golf courses and fancy foods. They build new stadiums, first-class swimming pools, media rooms, and some even offer students housekeeping.

Why not spend? Colleges know they will get more money from taxpayers. The federal government is now America's biggest largest provider of student aid.

"There is no check on the cost of a college degree," says Stepman. "If students had to walk into Wells Fargo for those loans, Wells Fargo would look at whether or not those loans would be paid back. The federal government doesn't ask any of those questions."

So, money is thrown at students who don't benefit. Today, almost half the students given loans don't graduate in six years.

Instead, says Stepman, they have "$50 or $60 or $80,000 in debt, without the degree to show for it."

Taxpayers lose. Students lose. The winners are bloated colleges.

Colleges say they deserve every loan and tax break because they make "wiser citizens."

"They're not," says Stepman. "They're making citizens who hate their country."

I push back again. "Most colleges educate rather than indoctrinate."

"I wish that were true," replies Stepman. "I was part of the College Republicans… registering voters. I actually had a professor walk up and spit on me. Another called us the 'Nazi Youth.' These are professors!"

"It's offensive," she adds, "that we take dollars out of mechanics' pockets and put them into the pockets of, largely, middle-class and upper-middle-class students."

It is offensive.

But that's what America does.

Unfortunately, our next president wants to do even more of it.


NEXT: Biden’s Drug Policies Are Still Oppressive

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  7. Princeton’s Toxic Tom is clearly no Ivy man, but why in the name of Tiger Inn and Cap and Gown no mention of his own dining club’s tax subsidies?

  8. Stossel is so good.

  9. I think that higher education is indeed a total ripoff, especially if you’re studying liberal arts. I studied English Literature and we would write essays every single day. The funny thing is that I paid for something that I hated doing in the first place. I hate writing essays, that’s why I use companies like Essay Box to help me with my writing assignments.

  10. My fun college pricing story. The year before I went to my private college, they raised their prices to be $50,000 a year. Their reason? They were no longer one of the most expensive colleges in the US which made them seem less exclusive.

    Fixing the student loan problem is going to take a lot of pain to people who think they have a right to other people’s money, and I’m not sure the best way to go about it.

    1. Designer labels always cost more.

  11. As government money has flowed into covering college education, tuition has gone up dramatically. This occurred even as dissemination of information became easier and cheaper.

    The influx of money has paid for expansion of the administrative layer in the colleges and improving the physical environs from pleasant to palatial. Meanwhile, the educational product delivered has gone from sometimes useful/sometimes not, to actually destructive of the students mental health and ability to think clearly.

    This has NOT been money well spent.

  12. Wow. The Reason and Stossel advocating for someone to pay MORE taxes.

    1. Pretty much the opposite. He’s saying because they pay no taxes and have multi-multi-billion dollar endowments, rip-off joints like Harvard and Yale shouldn’t be so heavily subsidized with taxpayers dollars.

      1. Yes. But still Stossel is arguing for more tax.

        Worse yet, he is looking to single out “elite” schools because they have lots of money. Sort of…kind of….(drum roll please)…..wealth tax. Liz Warren would be so proud of him.

    2. Subsidies and taxes are two sides of the same coin. Both are transfers of income from the people to the government, dished out per the government’s wishes.

      1. Fine, get rid of ALL university subsidies: Harvard, Yale, Florida, Appalachian State, Kutztown University, etc.

  13. Hell, this idea that colleges charge whatever you can afford to pay plus all the government will subsidize and that therefore every time the government increases subsidies the tuition goes up that exact amount has been known for 40 years – we joked about it back when I was in school. Colleges and universities are simply a scam when their primary purpose is to collect as much government money as they can and the idea that you can “increase subsidies” your way out of the problem is part of the “building a perpetual motion machine” problem.

    You think about Bernie promising free college tuition as a right – okay, college tuition is now 12 billion dollars a year per student. Is the government going to pay that? No, of course not, they’re only going to pay a “reasonable” amount. What the hell is a “reasonable” amount when there’s no market pricing information to establish what college tuition “should” be? Well, Bernie Sanders, in his infinite wisdom. is going to tell you what the correct price for things should be because he’s much smarter than you and knows exactly what the market should produce and in what quantities and at what prices because central planning has such a great track record compared to free-market capitalism.

    1. Nobody needs 27 different colleges.

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  15. Why should any enterprise pay taxes?

    In a perfect, or at least much saner, world governments would provide minimalist functions. To fund these, citizens and other residents would pay an equal head tax.

    Enterprises can certainly pay fees for services, just like individuals or households.

    Now, discuss Yale.

  16. This is a good article/video but like too much of the post secondary education discussion, it is far too limited. To say the problem with colleges is that we should not subsidize them or alternatively that college should be free simple misses the scope of the problem.
    This is a problem at all levels, student need to be ready and work when they get to college, school need to better use the money they have, government need to support colleges in an effective manner.
    My tuition like John Stossel was far less than a student pays today, but part of that was because school were directly subsidized. Today school look for more support from the students tuition, this means competition for student, that means more amenities.
    As for the crap on student indoctrination. That is the Liberal Arts Campus, go to a schools Business Campus, Agricultural Campus, or Engineering Campus and you would not find that professor yelling at you.

  17. Yet, Reason political advocacy aligns with institutions like Yale.

  18. I would be interested in a study showing how many people that are employed by fedgov, particularly in the beltway, that went to Ivy League schools, Georgetown, etc.

    Back in the early 2000’s (forget what year) during the recession, I saw a map of the country color coded by county. It had one color for economic decline, and one for growth. Almost the entire country showed decline, except for a few counties around DC that were still experiencing economic growth. These counties have no industry, no tourism, etc. Their money comes from taxes from the rest of the country.

    Like it or not, we have a ruling class in this country, and like it or not, Trump was not a member of this ruling class. And he will probably be the last President not from this ruling class for a long time.

    1. Interesting post, but are you reading the data correctly? Do you really think the average person in DC is making a fortune. Many of those people are shop keepers, work in restaurants or hotels. Most of the government workers are likely book keepers, clerks, workers at government building (again janitors, food service, ground keepers). I am guessing the big money is in lobbying and law firms. You are right it is our tax money but its is likely laundered through some organization, corporation, or foreign country.

      1. All those rich swamp creatures need someone to do their dry cleaning and cook/serve their fancy nights out.

      2. So interesting it went right over your head. In the rest of the country, many of the people not making a fortune lost their jobs, houses, etc. Of course their were people not making a fortune. Most of them weren’t. But while the local economies throughout the rest of the country were declining, the local economy of DC continued to grow. With money confiscated from the rest of the country.

        1. The profession of THEFT is locked in pretty well when you see more unemployed people voting than employed. Taking for granite this latest election’s ballots actually represented people… lol.. 🙂

        2. Your point did not go over my head, I was simply trying to look at the data and the reality. What we know is that the economic impacts of the pandemic are falling hardest on the blue collar and less well educated workers. Regardless of the location. Employment data shows that white collar workers and more well educated workers has seen little or no drop in employment. Meaning they are drawing wages. In contrast blue collar workers, particularly those in the hospitality field have been devastated. This is not limited to Washington DC but is a fact throughout the country. A workers in a DC government office is likely no more or no less affected than a private sector office worker in another part of the country.

          What we see is that education plays a big role in how you are doing in this pandemic. This means that education has value and that colleges can leverage that value to draw in tuition paying students.

    2. The fact that DC/North Virginia has grown into what it is today is proof of the power of government to reward itself financially.

      Personally, having worked in both municipal government an the private sector, I think people go into govt jobs for money and influence and people go into the private sector to make real things and improve the lives of others.

      1. ^BINGO!!! Perfectly said…

  19. College pricing is really virtually identical to drug pricing. You have a system that is marketed as if it is at the base tier of Maslow’s hierarchy of human needs, built upon third party subsidies, heavily reliant on nontransparent “discounts” that enable it to simultaneously price discriminate and raise public-facing list prices that are phony and are intended to do little more than create false perceptions of value.

  20. Inez Stepman was spit upon by a professor – and called “Youth Nazi” by another? I suppose she had better things to do with her time, but I would have encouraged her to shared her stories – including the names of the professors, with the press. I would also have sent letters expressing disappointment in the inappropriate behaviors of those professors to the college president as well as to the board members of the college. The professors behaved badly – and it’s not okay to let that sort of stuff go, even if it’s just a mild rebuke in the press or official negative memo in the professors’ HR files.

  21. Reasonable people certainly do not want to pay taxes to support communism. Many of these schools have deluded themselves and their students into thinking that there’s a meaningful difference between communism and fascism. Let us remove these communist colleges and universities from the public dole.

  22. Inez Stepman sounds like a worthless, whining, obsolete clinger who can’t be replaced fast enough.

    People who think colleges should be taxed while churches freeload deserve no respect from competent adults.

    Carry on, clingers . . . but only so far as your betters permit.

    1. Somebody has got to update the script here, it’s spitting out the same thing every time

  23. A tax break isn’t a handout. It’s a reprieve from theft.
    A loan guarantee is a handout.

  24. What does 80% of Ph.D’s in ‘commie-education’ teach a person after 20yrs?
    – Not how to build your own house
    – Not how to fix and/or maintain heating and cooling
    – Not how to feed yourself
    – Not how to diagnose your own health problems
    – Not how to create a machine to do any of the above
    – Not how to operate a machine that does any of the above

    HOW to ‘teach’ other’s to be just as useless as they are by creating delusions over hypothetical theories that have an end result of accomplishing nothing at all.

    The other 20% get about 20% of useful information out of 20yrs. Where the other 80% will be spent on G.E. which is exactly everything stated above.

    1. Then of course; what else where the people expecting to get out of asking professional politicians to lead the education of people.

  25. Leftist institutions should walk the walk.
    Students should all stay home and do the courses online…..Hahvid (for instance) should donate their campus to Cambridge, that would then be used to house “the poor”…..use their endowment to feed ‘n educate them.
    Leftist institutions got a lot of nerve, using capitalism to promote communism.

    1. Communism has always been parasitic

    2. Would love to see that, but unfortunately Harvard and all the elite colleges have convinced everyone that their fancy campus is essential for the coddling of our next generation of betters. I mean, some of these kids might be traumatized if they have to interact with anyone outside of their bubble.

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  27. While Stossel is correct on the facts, he is still advocating for someone to pay more taxes.

    His is not an argument for cutting off subsidies for not-for-profit universities. If he was arguing for cutting of federal aid to Appalachian State AND Yale, that’s one thing, but he is not. This is a argument for singling out “elite” school, like Harvard and Yale, because they have a lots of money. Money that they saved rather than spend.

    Let’s be honest, this is Stossel’s argument for a wealth tax. I guess Stossel likes communist ideas when it suits him.

    You know who has an every large pool of cash than Harvard and Yale, the Moron church. Should we cut-off their tax exempt status? I would love to see Stossel do on video on THAT.

    1. Good comment. Like most opinion writers John Stossel favors his point of view. That is OK. He need to remember that many of us read a variety of opinions and know that the real truth often is in the middle.

      1. On first glance, the new international data provide some support for this narrative. The U.S. ranks No. 1 in the world for spending on student-welfare services such as housing, meals, health care, and transportation, a category of spending that the OECD lumps together under “ancillary services.” All in all, American taxpayers and families spend about $3,370 on these services per student—more than three times the average for the developed world.
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  28. Colleges aren’t necessary. I think in modern world we can educate ourselves using internet. I’m self-taught, but this year I enrolled in college and didn’t feel any difference with my ordinary study routine. The only thing that changed for me is that I started getting assigned a lot of essays to write, but I use writing services, because I hate writing myself.

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