Massachusetts needs an endowment tax
Elite universities’ non-profit statuses allow them to accrue great wealth at the expense of their local communities
Members of the MIT Community,
My name is Jay Gonzalez. I’m running for Governor because I believe we face big challenges that require bold thinking and real leadership.
In Massachusetts, too many working families are being left behind, and our political leaders, particularly Governor Baker, are thinking too small and are too wed to the status quo. We have a transportation system that is among the worst in the country and an education system that is underfunded and leaving too many of our young people behind.
That’s why I’ve proposed investing significant new resources in education and transportation, starting with a modest tax on the robust endowments of the wealthiest private colleges and universities in Massachusetts.
As Governor, I’d file legislation to raise an additional $1 billion annually through a 1.6 percent tax on the value of endowments exceeding $1 billion. The tax would impact just nine private institutions whose collective endowment totals more than $65 billion, including MIT..
This is a fair proposal. These non-profits have accumulated enormous wealth in large part because they don’t pay taxes. One report estimates that Harvard University, which has a $39 billion endowment, receives about $48,000 per undergraduate student in tax subsidies and other government support. Meanwhile, the state spends just $8,000 per undergraduate student at UMass Boston. We know that a higher percentage of students who graduate from our public institutions choose to remain here in Massachusetts than those who attend the private institutions.
The government subsidies provided to institutions of higher education are regressive — the wealthier the institution, the more it benefits from tax breaks and the more government loses in revenue that could be invested to support broader public objectives.
I understand that this proposal comes at a time when higher education institutions feel under siege. Admissions policies are being challenged, competition for students and faculty is intense and growing internationally, and President Trump and Republicans in Congress are attacking your community rather than supporting it.
I want to be clear: I support and appreciate you and the incredible college you work for and attend. We’re fortunate to have MIT in Massachusetts. You help drive our knowledge-based and innovation-oriented economy. You also give financial aid to lower-income students who otherwise couldn’t afford their tuition.
But you are part of our broader community. Thanks to your tax-exempt status, MIT and many other colleges and universities have accumulated enormous wealth and are in a position to give back without impacting the important contributions you make.
Critics have argued that taxing MIT’s endowment will prevent you from providing scholarships and financial aid to needy students. But it’s worth noting that many elite colleges pay more in endowment management fees than they do in scholarships.
And even after you’ve made these valuable contributions, your multi-billion dollar endowments have grown at an average annual rate of 4.8 – 8.4 percent over the last 15 years. A modest tax should allow these institutions to keep doing everything they do today and still grow their endowments at a rate that exceeds inflation.
As important as these colleges and universities are to our economy and the strength of our community, our most important asset is our people. I am running for Governor to make a difference for you and all the working families being left behind. The people of Massachusetts are my top priority.
I know it’s controversial. But my endowment tax proposal is fair, and it’s the right thing to do. The new tax revenue will result in a better-educated and more mobile workforce, a stronger economy, and a better quality of life for working families being left behind.
Jay Gonzalez is the 2018 Democratic Party nominee for Massachusetts governor.