Home » Education and Reference

Endowment Tax is Unsound Public Policy

Jun 16, 2008
I just read in the May 19 Christian Science Monitor that a Massachusetts legislator proposes a 2.5 percent tax on college endowments over $1 billion. The Commonwealth State has nine such institutions including Harvard, MIT, Williams, Boston College, Amherst, Wellesley, Tufts, Smith and Boston University; all of them are among the most selective schools in the United States.

State representative Paul Kujowski, sponsor of the endowment tax legislation believes these institutions have accumulated an exorbitant amount of wealth while retaining their non-profit status. I can believe that Representative Kujowski did the math, and found that Harvard alone would pay $850 million on $34 billion of their endowment and MIT $250 million on their $10 billion; a smart politician knows a cash cow when he sees one.

But this legislation is a dumb idea.

For one thing, many donors who support these universities do not live in, and therefore do not pay income tax to the State of Massachusetts; they pay taxes to their state of residence. Why should their contributions be taxed by a state where they have no right to vote? That's very much like a commuter tax, another policy I revile.

Secondly, these institutions are major investors and employers in Boston and the other cities where they do business. They already pay payroll taxes and payments in lieu of property taxes. They also employ young people in part time jobs, more so than most large private corporations. They lend professional expertise to state government and of course, in their most important role, produce tax paying citizens. And a college closing can be devastating to its community, including alumni who are trying to advance in their careers; their academic credentials get called into question or, they become more difficult to verify.

Finally, as far as the public knows, the monies raised from this policy would go into the state's general fund; they would not be assigned to an education-related purpose. For instance, Massachusetts governor Deval Patrick has proposed free community college as a post-secondary education option. If the proposed endowment tax were dedicated in a direction like this, it might be more palatable to the best endowed private colleges, which are not in a position to take many transfer students. But this is similar to the "luxury tax" in Major League Baseball, where the teams with the highest revenues subsidize those with the lowest to improve competitive balance. This doesn't work with colleges: the institutions that would subsidize the less endowed schools would have little to no say over their management -- in fact, they might be subsidizing mismanagement when they could have put the money to better use in their endowment.

I have no doubt that the progress Representative Kujowski's proposed legislation will be closely watched by other state legislatures in years to come, especially California, Texas, Pennsylvania and New York. In addition to Massachusetts, these states have the most institutions in the Billion Dollar Club. The difference is that there are public institutions with endowments of $1 billion or more in those states -- the Massachusetts schools in the Club are all private - so such legislation might prove to be less popular elsewhere. This progress of this legislation will also be watched in Congress, which might look at a similar tax.

In that case, the opposite of progress might be Congress.
About the Author
Contact Stuart Nachbar at Educated Quest, a blog on education politics, policy and technology or read about his first book, The Sex Ed Chronicle, a novel on education and politics in 1980 New Jersey, at Sex Ed Chronicles.
Rating:
Please Rate:
(Average: Not rated)
Views: 239
Print Email Report Share
Article Categories
    • Artists
    • Gambling
    • Humanities
    • Humor
    • Movies
    • Music
    • Photography
    • Tattoos
    • Television
    • Classic Cars
    • Motorcycles
    • Recreational Vehicles
    • SUVs
    • Trucks
    • Vans
    • Branding
    • Business Opportunities
    • Careers and Jobs
    • Corporate
    • Customer Service
    • Direct Mail
    • Entrepreneurship
    • Ethics
    • Financing
    • Franchising
    • Home-Based Business
    • Human Resources
    • Import and Export
    • Leadership
    • Management
    • Market Research
    • Marketing and Advertising
    • Negotiation
    • Network Marketing
    • Networking
    • Organizational
    • Presentation
    • Project Management
    • Public Relations
    • Small Business
    • Strategic Planning
    • Team Building
    • Telemarketing
    • Training
    • Data Recovery
    • Databases
    • Games
    • Hardware
    • Networks
    • Operating Systems
    • Programming
    • Security
    • Software
    • Spyware and Viruses
    • Accounting
    • Credit
    • Currency Trading
    • Debt Consolidation
    • Insurance
    • Investing
    • Leasing
    • Loans
    • Mortgage
    • Mutual Funds
    • Personal Finance
    • Stock Market
    • Structured Settlements
    • Taxes
    • Wealth Building
    • Coffee
    • Cooking
    • Gourmet
    • Recipes
    • Wine and Spirits
    • Acne
    • Aerobics
    • Alternative Medicine
    • Beauty
    • Cancer
    • Cosmetics
    • Depression
    • Diabetes
    • Diseases and Conditions
    • Fitness Equipment
    • Fitness
    • Hair Loss
    • Heart Disease
    • Medicine
    • Men's Health
    • Muscle Building
    • Nutrition
    • Skin Care
    • Supplements and Vitamins
    • Weight Loss
    • Women's Health
    • Yoga
    • Arts and Crafts
    • Babies
    • Collecting
    • Elderly Care
    • Genealogy
    • Hobbies
    • Parenting
    • Pets
    • Pregnancy
    • Woodworking
    • Feng Shui
    • Gardening
    • Home Appliances
    • Home Security
    • Interior Design
    • Landscaping
    • Affiliate Programs
    • Article Marketing
    • Auctions
    • Audio
    • Banner Advertising
    • Blogging
    • Broadband
    • Domain Names
    • E-Books
    • E-Commerce
    • Email Marketing
    • Ezines and Newsletters
    • Forums
    • Internet Marketing
    • Link Popularity
    • Pay-Per-Click
    • Podcasting
    • RSS
    • Search Engine Marketing
    • Search Engine Optimization
    • Security
    • Social Media
    • Spam
    • Video
    • Viral Marketing
    • Web Design
    • Web Development
    • Web Hosting
    • Copyright
    • Cyber Law
    • Intellectual Property
    • National, State, Local
    • Patents
    • Regulatory Compliance
    • Trademarks
    • Buying
    • Selling
    • Baseball
    • Basketball
    • Boating
    • Cycling
    • Extreme Sports
    • Fishing
    • Football
    • Golf
    • Hockey
    • Hunting
    • Martial Arts
    • Running
    • Scuba Diving
    • Soccer
    • Swimming
    • Tennis
    • Dating
    • Divorce
    • Marriage
    • Weddings
    • Astrology
    • Buddhism
    • Christianity
    • Faith
    • Hinduism
    • Islam
    • Judaism
    • Meditation
    • Metaphysical
    • New Age
    • Cable and Satellite TV
    • Cell Phones
    • Communication
    • Gadgets and Gizmos
    • GPS
    • Satellite Radio
    • Video Conferencing
    • VoIP
    • Addictions
    • Coaching
    • Goal Setting
    • Motivational
    • Stress Management
    • Time Management
    • Clothing
    • Electronics
    • Fashion
    • Gifts
    • Jewelry
    • Causes and Organizations
    • Environment
    • History
    • Holidays
    • Men's Issues
    • Nature
    • Philosophy
    • Politics
    • Women's Issues
    • World Affairs
    • Air Travel
    • Camping
    • Cruises
    • Destinations
    • Outdoors
    • Article Writing
    • Book Reviews
    • Copywriting
    • Fiction
    • Non-Fiction
    • Poetry
    • Quotes
    • Screenplay
    • Tools and Resources