Open Letter to the Ferguson Commission

Clayton, Missouri, seat of St. Louis County government
Clayton, Missouri, financial center and seat of St. Louis County government

Dear Ferguson Commission Members:

Thank you for taking on the task of finding ways to heal our community. I would like to offer a proposal for your consideration. It is time to use tax policy to redress severe inequalities.

The killing of Michael Brown Jr., and the events that followed, demonstrated once again that institutionalized racism is alive in St. Louis—City and County. But I am encouraged by the new proposal from one of your commission’s working groups, which calls for additional police training aimed at reducing racial bias. Last October, veteran activist Percy Green II advocated that police receive regular psychological testing and be required to live in the communities they serve. I believe those recommendations are also essential.

We must confront racism in policing and in other aspects of daily life. But we must also deal with economic divisions. Municipalities like Ferguson receive a large part of their operating funds from a race- and class-biased system of excessive fines. That poisons relationships between police and community, creating a system that more closely resembles a colonial occupation than the protection of free citizens.

These are the main economic causes of that system: the rich do not pay their fair share in taxes, and rigid divides between jurisdictions prevent the wealth of St. Louis from benefiting all St. Louisans. For the past three-and-a-half decades, the wealthy have received one huge tax cut after another. When the rich avoid taxes, the working class gets squeezed. And working-class African Americans are by far the most frequent targets of profiteering law enforcement.

Likewise, Michael Brown Jr.’s story highlighted educational inequalities. It brought media attention to issues of poverty and budget shortfalls at Normandy High School, problems that symbolized the struggles of so many public schools. Again, this is about taxes, and those who do not pay their share.

I propose that, in addition to raising taxes substantially on the rich in general, we revoke tax exemptions for rich, socially exclusive colleges. I recently resigned my position as an archivist at Washington University to protest taxpayer-subsidized class bias in admissions. Wash. U. is the least economically diverse top national university in the U.S. News & World Report rankings. Only 6% of that university’s undergraduates receive Pell Grants, a federal scholarship for low- and middle-income students.

Washington University also lags behind in racial diversity: 6% of Wash. U. undergraduates are African American and 5% are Hispanic, according to the most recent federal data. Yet that university is exempt from taxes—federal, state, and local—despite possessing an endowment of (at last federal count) $5.3 billion.

Wash. U. administrators recently set a goal of 13% Pell Grant recipients in the 2020-21 freshman class, which may not even be enough to get Wash. U. out of 25th and last place on the U.S. News economic-diversity list. For comparison, here are the latest (2012-13 academic year) percentages of Pell Grant recipients at local four-year colleges:

Harris-Stowe State University: 84%

Fontbonne University: 43%

Webster University: 41%

Lindenwood University: 39%

University of Missouri at St. Louis: 34%

Maryville University: 34%

Missouri Baptist University: 23%

Saint Louis University: 15%

Washington University: 6%

(Figures are based on federal data available here and here.)

I am sure that Wash. U. administrators would tell us that theirs is a leading international university and that such local comparisons are unfair. But the University of California at Berkeley is rated higher than Wash. U. in most rankings and has an endowment with less than one-fourth the value of Wash. U.’s. However, 36% of UC Berkeley undergrads are Pell Grant recipients. I do not believe that colleges with enormous wealth, such as Wash. U., deserve tax exemptions, unless they do at least as well as UCB in enrolling Pell recipients.

Washington University also discriminates blatantly in its admissions policies. That university offers preferences for rich, and mostly white, children of alumni, known as “legacies.” That system of hereditary privilege has no place in the 21st century. It is especially unfair to working-class St. Louisans, whose children are placed at a disadvantage when applying to Wash. U., but who have to pay regressive sales taxes that Wash. U. is allowed to avoid.

To be fair, Washington University provides services to the St. Louis community, especially in the form of programs that offer free health care for some low-income patients. But the value of those services is outweighed by the negative effects of the university’s tax exemptions. Also, a university is ultimately about students, and decisions about which students to admit should not be discriminatory. The problem with institutions such as Wash. U. is that they want to act like country clubs and be taxed like charities.

St. Louis University, with a 2012 endowment of $852 million and only 15% Pell Grant recipients in its undergraduate student body, also stands out as a rich institution sadly lacking in social diversity. As such, SLU should also lose its tax exemptions. Many assume that religious institutions are guaranteed tax exemptions by the U.S. Constitution. That is not true; it is simply a matter of policy.

There is also a simple, practical consideration. Whenever anyone proposes a corporate tax increase, we always hear that it will drive out business. Well, St. Louis’s rich colleges are not going anywhere. We’ll never see Chancellor Mark Wrighton uproot Washington University, put it on the world’s largest flatbed truck, and drive it to Kansas to take advantage of tax cuts for business. (Sorry, Governor Brownback.)

There is little information on the financial value of tax exemptions for private colleges. Those institutions’ private status restricts access to data, and most experts have ignored the issue. In 2013, however, Brian Schmidt, former executive director of the Missouri General Assembly’s Joint Committee on Tax Policy, estimated tax losses from properties Wash. U. owned in University City, excluding those on the main Wash. U. campus. He reported that there was “a loss of potential tax revenue totaling $1,056,279 in 2012.”

That revenue loss relates to only a portion of Wash. U.’s property, and property tax is only one area of taxation. The university is also exempt from paying taxes on the purchases it makes, the donations it receives, and its income from investments on Wall Street. Despite the effects of the financial crash of 2008, Wash. U.’s endowment grew by an average of $118 million a year between 1999 and 2012—all tax-free. We can no longer afford such indulgence, if we ever could.

As I write this, events in Baltimore are providing a grim reminder that the problems that caused the Ferguson crisis still plague the country and the world. To solve those problems, we need to address economic inequalities as well as racial ones. Fairer tax policies, including taxation of rich, socially exclusive universities, must be part of the solution. I respectfully urge you to say so in your report.

Thank you for your consideration.

Sincerely,

Chris Pepus

St. Louis County resident and taxpayer

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