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Offshore financial records dubbed the Paradise Papers were released on Nov. 5 by the German newspaper Süddeutsche Zeitung. The papers unveiled how moneyed individuals, power-hungry companies, and world-famous institutions shield their riches from the Internal Revenue Service. The leak revealed that a number of large college endowments, including Princeton’s, have been hiding their investments in offshore tax havens on Caribbean Islands.

The question of whether or not Princeton can be morally justified in having an offshore account hinges on how willing we are to give primacy to the claims of the “goods” provided by the endowment over an evaluation of the endowment’s necessity and efficacy in producing such benefits. To make this judgement, a basic working knowledge of what is potentially “sketchy” about offshore accounts is needed.

Here’s a brief summary: In a bid to increase their investments, institutions like Princeton have begun to increasingly partner with hedge funds and private equity funds. Legally, while endowments are tax-exempt, they owe taxes on any additional funding they receive through their partners that is not strictly connected to their “educational mission,” unless they can find offshore corporations to bury the loot.

I believe that no defense of Princeton’s endowment, including the “benefits” claim, can overcome the obvious fact that the practice of abusing loopholes to avoid paying dues is morally dubious and objectively “wrong,” even if doing so supports a potentially worthy cause. Furthermore, the fact that the offshore accounts were kept hidden and are only coming to light now speaks to a lack of accountability on the University’s part and suggests that there exists no adequate reason for its needing to increase its endowment specifically through the extra offshore income.

I don’t mean to imply that endowments are always kept for insidious, self-serving reasons in the name of promoting social elitism, or funding a politically charged liberal agenda. I merely believe that college endowments — like all institutions — should be restricted to acting within reasonable bounds, employing only above-board methods of earning their income that they use to give back to society. They should also be subject to oversight and regulation in order to ensure that they are spending their money in the most effective ways possible to offer the greatest benefits.

Princeton’s endowment has allowed it to do many good deeds, as noted by columnist George Will in The Washington Post. The endowment, representing over half of the University’s annual income, supports the 60 percent of undergraduates currently on financial aid and provides stipends to cover living expenses for graduate students. It enables most students to graduate debt-free with no loans. The expansion of the financial aid program has allowed for a need-blind admissions process that has increased socioeconomic diversity among the student body.

These are not insignificant “goods” that should be overlooked or discounted. It’s true that without such a large endowment, the University would have to abandon this commitment to supporting lower-income students and have to raise tuition prices to cover its expenses. The University supports a thriving, diverse community with its endowment; this fact I cannot dispute. However, I believe that no decent reason has yet to be offered as to why the already-large endowment — that clearly is in no danger of shrinking — has a reason to use offshore accounts to grow just a little bit more. After all, while the total endowment itself has had a positive societal impact, there has been no proven benefit that can be tied solely to the money kept in offshore accounts. In order to justify holding offshore accounts, I would argue that there still needs to be a certain base level of transparency about where the money goes to convince me that the benefit offsets the illegality of the act.

Still, the morality of offshore investing aside, I do not think that we need to extend this debate to the morality of endowments in general. The suspicion that the largest of college endowments — unsurprisingly found among the Ivy League schools — are not using their riches to adequately reduce to educational disparities that young Americans face due to income inequality is so far unfounded. Sadly, Congressional Republicans have spearheaded a skeptical “anti-endowment” camp by capitalizing on the current mention of many schools in the Paradise Papers and the populist sentiments espoused by their base’s Trump-backing faction. Their new tax proposal is designed to eat away at what they see as universities’ ill-gotten funds in the name of supporting the working class against the greed of liberal college-educated elites, as evinced by the fact that it takes aim at the Ivy League, taxing only a small concentration of schools — around 60 to 70 schools — with student bodies totaling at least 500 and assets of at least $250,000.

I would argue that taxation is not the answer. Estimates by the Joint Committee on Taxation suggest that revenue generated by taxing college endowments would amount to a petty 0.003 percent of our government’s annual revenue in 2018, or only $200 million, which is considerably less than the net worth of many CEOs. The only thing that the Republican bill accomplishes is to offer a weak normative argument for why universities and the educated class are “bad.” Furthermore, despite the empirical statistics underlying their bill, the Republicans’ attack on endowments wrongly implies that endowments in general are a commonplace atrocity of most “elite” universities and should be dismantled at all costs.

The truth is that the majority of universities in the United States in fact do not have large endowments being replenished by a pipeline of billionaire alumni, and they may only receive nominal funds and “gifts” that will never swell to the proportion of Princeton’s endowment. Many schools simply do not have cash to burn and must use whatever funds they can scrounge for just to keep their doors open without astronomically hiking up tuition rates or cutting financial aid packages. Thus, the Republican barrage of rhetorical attacks on the inherent concept of endowments offers no better a solution to the broader issue of income inequality in the United States than universities’ current use of their endowments to educate as many people as they can.

Ultimately, the decision of how much money should be allowed to be concentrated in the hands of one institution will always be a politicized, murky, and endlessly debatable topic. However, I believe that we can still parse out the benefits that college endowments — both large and small — offer to the millions of students seeking educational and economic opportunities. Furthermore, by supporting endowments and all that they offer through their tax exemption, we do not need to support questionable choices on their part, such as their reliance on offshore investing. Now that the Paradise Papers have exposed this indisputably illegal but rectifiable practice, it’s time we stop moralizing and move on. So long as university endowments remain transparent about their finances, keep records of their spending, and demonstrate not only gains in their investments but also accomplishments of their goals, we don’t need to wage a war against them.

Hayley Siegel is a sophomore from Princeton, N.J. She can be reached at

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