Just in case you missed it, the Massachusetts legislature has voted to study the idea of taxing college endowments 2.5 percent annually on the amount that exceeds $1 billion. That puts Harvard, with a $34 billion endowment that includes funds from HBS, squarely in the crosshairs of the tax man. And it also aims at Amherst College, Boston College, Boston University, Massachusetts Institute of Technology, Smith College, Tufts University, Wellesley College, and Williams College. Across the country, 67 other colleges and universities have endowments valued at more than $1 billion.

Supporters say the new levy would raise about $1.4 billion for the cash-strapped state — $841 million from Harvard alone. “When is a nonprofit not a nonprofit because of the wealth they are acquiring?” Representative Paul Kujawski, the chief sponsor of the idea, told the Boston Globe on May 8. “It’s mind boggling that one entity not paying taxes has $34 billion. How do you justify that?”

One way is to look at the benefits these institutions collectively deliver. The schools targeted employ 27,000 people and pay $4.5 billion a year in wages, according to the Association of Independent Colleges and Universities in Massachusetts. Then there’s the collective brainpower of their faculties and the spillover into public- and private-sector research and job generation. And even if the tax idea had merit, enforcing it would create huge problems. As Harvard spokesman Kevin Casey points out, most endowment money is tied up by restrictions on how the money can be spent. That would force schools to raise money just to pay the new tax bill.

“If donors knew that the money they bequeathed to their alma mater would partially or fully be heading to the state (or push the target college or university over the $1 billion mark), they would think twice before writing that check,” editorialized the Harvard Crimson on May 9.

The study is expected to take months, and most observers figure the idea will quietly die. But that leaves plenty of time for supporters and opponents to weigh in. What’s your take?

Post a Comment