Friday, May 9, 2008
From yesterday's Boston Globe: Lawmakers Target $1b Endowments; Exempt Status of Schools Debated, by Peter Schworm & Matt Viser:
Massachusetts lawmakers desperate for additional revenue are eyeing the endowments of deep-pocketed private colleges to bolster the state's coffers by more than $1 billion a year, asserting that the schools' rising fortunes undercut their nonprofit status.
Legislators have asked state finance officials to study a plan that would impose a 2.5% annual assessment on colleges with endowments over $1 billion, an amount now exceeded by nine Massachusetts institutions. The proposal, which higher education specialists believe is the first of its kind across the country, drew surprising support at a debate on the State House budget last week and is attracting attention in higher education circles nationally.
The idea has prompted a range of questions, including whether it is legal to infringe upon private colleges' tax-exempt status or single them out based on their wealth. It also faces significant opposition from the colleges and some skeptical lawmakers.
Today's Boston Globe editorializes against the idea in How to Strangle an Economy:
Representative Paul Kujawski['s] ... amendment to the House budget calls for a study of a 2.5% assessment each year on university endowments over $1 billion. The tax would affect nine of them, and in theory could generate an enormous amount of revenue; Harvard alone, with its endowment of $34 billion, would be on the hook for $840 million a year. But a tax of this magnitude on the state's universities and colleges would be economic suicide. ... The Legislature should abandon the endowment tax - an ill-conceived money grab that ignores how vital higher education is to the local economy.
(Hat Tip: Eric Lustig.) More media and blogosphere coverage: