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Gonzalez floats tax on private college endowments

  • Staff Photo/Dan Little Staff Photo/Dan Little



Staff Writer
Thursday, September 20, 2018

NORTHAMPTON — Democratic gubernatorial candidate Jay Gonzalez has announced a proposal to tax the large endowments of the state’s wealthiest private colleges to pay for large investments in public education and infrastructure.

The plan calls for a 1.6 percent levy on private, nonprofit colleges and universities with endowment funds exceeding $1 billion. There are nine such institutions in the state, including Amherst and Smith colleges. Gonzalez says the raised revenue would fully fund public schools, would make public universities and community colleges “affordable and debt-free,” would help fund affordable child care and preschool, and would improve public infrastructure.

“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,” Gonzalez said in a statement. “With $1 billion in new investments each year, we can make real progress toward delivering a reliable, modern public transportation system and creating a public education system where every child in this state has the opportunity to succeed.”

Efforts to contact the Gonzalez campaign for more details were unsuccessful.

Smith and Amherst colleges declined to comment on the idea, referring the Gazette instead to the Association of Independent Colleges and Universities in Massachusetts — a trade group that counts Smith and Amherst among its members.

“We think it’s a terrible idea,” association President Richard Doherty said. “We think it’s bad for students, we think it’s bad for our economy and bad for Massachusetts.”

Doherty said he is concerned that the tax will negatively impact students who receive financial aid at the nine potentially affected institutions, which also include Harvard University, Williams College, Boston College, the Massachusetts Institute of Technology, Wellesley College, Tufts University and Boston University.

But supporters of taxing billion-dollar endowments point to the role that public schools play in educating those without the resources to attend a private school.

“We support taking a small portion of these large funds and putting them toward public education, which has been underfunded for almost three decades,” said Zac Bears, executive director of the Public Higher Education Network of Massachusetts, a group that previously testified in support of a bill in the Statehouse proposing a similar tax.

In his announcement of the plan, Gonzalez pointed to a 2015 study that estimated that Harvard received $48,000 in taxpayer subsidies for each of its 6,700 undergraduate students. The campaign also pointed to UMass figures indicating that 64 percent of the university system’s students stay in the state after graduation, making UMass the biggest contributor to the state’s workforce.

Doherty said plenty of private-college graduates end up staying in the state and end up contributing to the “knowledge-based” economy. He also questioned whether the tax would erode donor giving.

“What we have here is brainpower as our natural resource, and our colleges and universities absolutely create an environment where new things get discovered, get improved, get created,” he said. “To be sending out a signal to the rest of the country that we’re going to punish the institutions that are creating that fertile environment seems total folly to me.”

Bears, however, said that large private college endowments essentially operate as tax-free hedge funds, and that taxing that money and putting it toward public infrastructure and education would benefit the state’s economy and its students.

“It will be good for the economy by investing in students that need it the most, and not in elite private institutions,” Bears said.

Smith College has an endowment worth $1.9 billion, according to the college’s endowment summary as of March 31. Amherst College’s endowment was at an all-time high of $2.248 billion as of June 30, 2017, according to the college’s website.

Last year, Republicans in Congress passed a 1.4 percent tax on the investment earnings of wealthy colleges and universities like Amherst and Smith.

Dusty Christensen can be reached at dchristensen@gazettenet.com.