Otto von Bismarck is famously quoted as saying (although he probably didn't) that "Laws are like sausages. It's better not to see them being made." That's certainly the case with the tax bills passed by the U.S. House and Senate and now set for conference. Sausages and laws do end up containing things that on their own might be fairly unappetizing, but that doesn't mean they should include things that are inedible or rotten.

For higher education, there is virtually nothing good in this tax legislation, but that doesn't mean that everything that adversely affects us is wrong or an inappropriate part of a larger bill. But there are at least two distasteful provisions that our representatives and senators should remove before the sausage becomes law.

Both the House and Senate bills contain an "excise" tax on certain university endowments, although the threshold for applying the tax differs: $500,000 of assets per student in the Senate bill and $250,000 in the House version. The House bill originally applied to any college or university with more than $100,000 per student, but that was ultimately raised to $250,000. The Senate worked with that number until an amendment that would have exempted only Hillsdale College, which identifies itself as a conservative Christian college, failed, and then the threshold was raised to $500,000 to exempt Hillsdale (and incidentally others) instead.

The discriminatory nature of the provision reflects its unprincipled quality and may make it legally vulnerable. It doesn't apply to nonprofit institutions other than educational ones even if they are sometimes engaged in the same work.

Thus an endowment gift to a university to support medical research would be subject to the tax, but a gift to a hospital would not be. A gift to support music and art at a university would be subject to the tax, but not to a museum or city orchestra. Even though public university endowments have in most cases been accumulated by gifts subject to the same favorable provisions on charitable giving, a public university is exempted, regardless of how it spends its endowment income. And a university that falls just below the $500,000-per-student threshold is completely exempted from tax, whereas a university like Rice must in effect pay tax on earnings from the entire endowment.

Up until this bill, discussions about applying taxes to university endowments have focused on how those endowments were being used. Was the university spending enough? Was it spending a sufficient portion on scholarship assistance or other student support? A leading congressman I consulted about those proposals once told me that Rice is the "positive poster child" for endowment use. Our endowment supports 40 percent of operating costs and we regularly spend more than 5 percent of its recent average value. Nearly half of our endowment expenditures go to direct student support. The rest of our endowment income primarily supports faculty and research. Our endowment also helps keep our annual tuition and costs about $6,000 below most of our peers.

All of this got chucked out the window in the frantic search for revenue, and by the time the Senate had accommodated the desire to protect Hillsdale, the bill was limited to fewer than 30 colleges. It is doubtful that the bill would raise much more than $180 million per year toward closing the projected $1.5 trillion budget deficit increase. Our Texas legislators should be outraged that three of the 30 or so institutions affected are located here, where they contribute to the best in education and research.

Equally odious is a provision in the House bill, but not the Senate's, that would tax graduate students on tuition waivers, which are essentially scholarships to support their advanced education.

At a private university like Rice, this would mean taxing them on an income of about $70,000 even though their actual income is less than $30,000, multiplying perhaps by five times the taxes they currently pay on their stipend, and requiring them to pay over a quarter of their low income in taxes.

The result will be simply to discourage the very kind of advanced education our country needs to remain competitive and innovative.

Many of the greatest ideas that are now fueling our economy or saving lives through medicine came out of universities. The global competition for discovery and innovation is intense, and, as we know, that it leads to new industries and jobs.

Taxing higher education, and in particular taxing those extraordinary students who are receiving advanced education thanks to tuition waivers, will put our nation at a competitive disadvantage and is surely the opposite of making America great.

The conference on the tax bill occurring this week and next is a last opportunity to remove these two dubious elements from the sausage.

Leebron is president of Rice University.