Revenue: How to Tax Private Higher Education

Abstract

This working paper analyzes how New York City and its allies could secure substantial, durable revenue from wealthy private universities and other tax-exempt institutions that hold extensive property and endowments while contributing relatively little to local budgets. It documents the magnitude of foregone revenue under New York’s broad nonprofit property-tax exemption, highlighting how major institutions like Columbia and NYU avoid hundreds of millions annually even as public services and CUNY/SUNY confront austerity pressures. The paper assesses three strategic pathways: targeted litigation to reclassify certain nonprofit activities as effectively for-profit, expansion of voluntary and currently limited PILOT/SILOT arrangements, and taxation of endowments building on recent federal precedent. It argues that the most promising route combines a strengthened federal endowment tax with clearer authorization for municipal endowment taxes or an unrelated-business-income style framework, aiming to produce a more equitable and dependable revenue stream.