November 7, 2017

Dear Students, Faculty, and Staff,

The Tax Cuts and Jobs Act proposal, released last week by the House Committee on Ways and Means, has significant ramifications for Amherst College as an institution, for our ability to pursue our mission, for our students collectively, and for many of them as individuals. It needs to be understood.

Taken in its entirety, the proposal is extraordinarily wide-ranging in its impact on the accessibility and quality of higher education for lower- and middle-income Americans. The bill includes tax cuts that purport to help these families, but their impact is uncertain and their positive potential is countered by measures that make education less attainable.

If passed, the Act would eliminate the tax deductibility of student loan interest, impose a tax on employer-funded tuition for employees, eliminate the Lifetime Learning Credit, reduce the American Opportunity Tax Credit, and make the pursuit of graduate and advanced degrees significantly more expensive. It would also severely increase the cost and limit the access that colleges and universities have to capital markets, which is how many institutions make necessary campus renovations and important enhancements to serve their students.

An item of particular significance to Amherst is an unprecedented proposal to tax endowments of certain private, not-for-profit colleges and universities through an excise tax on investment income. Over many decades, Amherst has built one of the strongest endowments in all of higher education through the immense generosity of our alumni, parents, and friends; skillful investment management by our Investment Committee; and careful and responsible endowment spending policies. Amherst’s endowment allows the College to avoid a heavy reliance on tuition revenue and therefore to admit the most promising students regardless of financial considerations. As a result, Amherst has one of higher education’s most generous set of financial aid policies, including need-blind admission and a commitment to meet the full need of all admitted applicants through free-and-clear college grants that allow students to graduate debt-free. Fifty-six percent of Amherst students receive financial aid from the College in an amount that averages nearly $50,000 annually per aided student. Our financial aid policies also allow us to keep our commitment to recruiting, admitting, and educating the most talented students, regardless of background or how limited a family’s resources may be. It makes no sense for mission-driven institutions to forfeit mission-critical funds when other measures in the bill work against, not for access to higher education for low- and middle-income families.

The benefit of Amherst’s endowment to its students extends far beyond financial aid. Amherst stands virtually alone amongst its peers in funding more than 50 percent of its operating budget from its endowment, each and every year. As a result, the current endowment tax proposal stands to harm Amherst as much as any institution of higher education in the country. The College’s financial model supports an array of significant benefits for our students, including an 8:1 student-faculty ratio, a world-class faculty, a new Science Center and other academic and residential facilities, and student support services. None of this is possible without a strong and growing endowment.

In principle, the congressional proposal to tax not-for-profit institutions sets a dangerous and regrettable precedent. While for-profit corporations can fund federal income taxes from free-and-clear operating profits, not-for-profit organizations do not have that option. Amherst deploys its financial resources to the fullest extent possible in support of its mission. There are no free-and-clear profits to support taxation requirements. If enacted, the proposed tax plan, in effect, would require Amherst to redirect a portion of its resources from its educational mission to federal government expenditures.

The exact financial impact of the proposed endowment tax on Amherst is not clear at this early point; it will depend on the final definition of net investment income and future investment performance. Our early estimates suggest the impact on Amherst could be in the tens of millions of dollars over the next decade. An impact of this magnitude would hurt our ability to fund all aspects of our mission and provide the quality education we value and that current and prospective students expect.

Collectively, the tax plan provisions affecting higher education are difficult to understand or justify, given the stated intent of the bill’s supporters to help lower- and middle-income Americans. These changes will further discourage Americans from pursuing the education that will be increasingly necessary to their success in an economy that is demanding more extensive, not less extensive, education. Many institutions are already struggling to survive in an era of stagnant enrollments, and others are finding it increasingly difficult to provide financial assistance to worthy students. The notion of targeting this sector of the economy to deliver tax breaks elsewhere is shortsighted. It will serve only to limit the accessibility and quality of higher education and leave the American workforce less equipped to meet the needs of corporations, to start new businesses, and to serve the public interest.

I urge everyone in our community to take the time to understand and discuss all the implications of these proposals. More importantly, please reach out to your federal elected officials to communicate your concerns about this bill. We will be doing our very best to communicate the value of an Amherst education to our students, to our elected officials, and to society as a whole. It is our hope that greater wisdom will prevail.