IN the United States, almost everything is taxed. Sales taxes apply to the things we buy, property taxes apply to the things we own, and income taxes apply to checks we receive. Higher education is one of the few areas exempt from this ubiquitous taxation. The earnings of colleges and universities are, unlike yours and mine, untaxed.
Accordingly, our institutions of higher learning have accumulated enormous riches, as can be seen in the nearby chart. It shows how much money per student 15 institutions can earn on their endowments each year, depending on the rate of return. (These institutions have the largest per capita endowments.) Princeton’s annual yield exceeds $100,000 per student. Swarthmore College, my alma mater, has an annual cash flow equal to about $50,000 per student.
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