TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Friday, October 12, 2018

WSJ: Massachusetts Gubernatorial Candidate Wants To Tax The Ivory Tower

MassWall Street Journal, Massachusetts Gubernatorial Candidate Wants to Tax the Ivory Tower:

Massachusetts is home to some of the best colleges and universities in the world—and some of the worst traffic jams.

A Democratic gubernatorial candidate is betting residents of the Bay State will be willing to tax the former to alleviate the latter.

Jay Gonzalez is building his long-shot campaign around a levy on the endowments of nine private schools that would create revenue to invest in public transportation and relieve Boston-area congestion, among other things. Boston drivers spend 14% of their time driving in congestion, the worst of any U.S. city, according to the INRIX, a transportation analytics company.

The 1.6% annual tax, which would be levied only on private, nonprofit schools with endowments that exceed $1 billion, would generate nearly $1 billion, including $563 million from Harvard University and $210 million from the Massachusetts Institute of Technology.

“I think it’s fair to ask the wealthiest among us—including major institutions that have accumulated enormous wealth in part thanks to their exemption from taxation—to contribute to our greater community,” Mr. Gonzalez said.

https://taxprof.typepad.com/taxprof_blog/2018/10/wsj-massachusetts-gubernatorial-candidate-wants-to-tax-the-ivory-tower.html

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Comments

Governor Baker, the Republican Incumbent, has come out against this proposal and noted that it's an anti-education, Trump administration policy which most democrats opposed.

It's pretty shocking that a Democrat would specifically go after educational institutions to "fund education." That's like robbing Peter to pay Paul.

Massachusetts is a rich state full of high paying jobs in finance and tech. If you want to go after "Rich people" just tax capital gains more heavily or impose a tax on people with incomes greater than $1 million or put an inheritance tax in place.

Posted by: Endowment tax | Oct 12, 2018 3:51:07 AM

Massachusetts already gets its fair share of taxes from these universities, via the salaries and property taxes of the people associated with them, or the people associated with the huge number of startups and tech companies that these universities generate locally. Someone's trying to pluck a few feathers or carve a leg off of a golden goose.

Posted by: ruralcounsel | Oct 12, 2018 4:19:52 AM

It's like the hotel tax-- a good way to tax interstate commerce and get away with it.

Posted by: Eric Rasmusen | Oct 12, 2018 7:38:23 AM

Another idea: the states should impose a high tax on endowments that don't spend at least 10% of their value per year. That way they'd get the state income tax on the additional spending that woudl occur, and prevent nonprofits from just piling up donor-proofness.

Posted by: Eric Rasmusen | Oct 12, 2018 7:39:50 AM

@Endowment tax,

Unfortunately, you see, there is more than one state and those VC/PE/HF jobs that shower their execs in cap gains are pretty portable. That's why a lot of those jobs have been leaving NYC in favor of Palm Beach the last few years for taxation reasons. There's no reason to think that many of greater Boston's high finance firms wouldn't abscond if the state raised taxes on them.


Posted by: Unemployed Northeastern | Oct 12, 2018 12:39:16 PM

A bit more background context at the municipal level: Boston is, geographically speaking, very small. Under 50 square miles. And much of that land is held by wealthy non-profits: universities, hospitals, research institutes, museums, etc., who don't pay property taxes. So for several years now, Boston has had PILOT: Payment In Lieu of Taxes, which is a voluntary payment asked of these institutions based upon the value of their assets, since obviously the city spends a fair amount of money providing sundry municipal services to these places (police, fire, road maintenance, etc.). I think for the larger actors, Boston University for example, would be several million but under ten. Very few pay the full requested amount, the entities that do tend to be the hospitals, and at least some of the universities decide to give the city the metaphorical finger each year and pay nothing. The point is that bad blood has been building.

Posted by: Unemployed Northeastern | Oct 12, 2018 12:44:58 PM

Yes, let's make Universities completely under the control of politicians or billionaire donors. What could possibly go wrong?

While we're at it, let's do the same thing to churches and media organizations.

Posted by: Endowment tax | Oct 12, 2018 2:36:38 PM

@Endowments,

Yes, because Harvard has ever turned down a big donation with a quid quo pro attached. Sure. One harkens back to the HBS-Monitor Group-Libya kerfuffle.

Posted by: Unemployed Northeastern | Oct 13, 2018 10:24:31 AM