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pbleic · 05-09-2008, 08:01 AM

I don't usually agree with the Boston Globe, but they are spot on (except for their last suggestion viz. raising the income tax). This is a nice quick summary ("Cliff's Notes).

How to strangle an economy

May 9, 2008

REPRESENTATIVE Paul Kujawski of Webster says his proposal to tax the endowments of the state's wealthiest universities and colleges was intended in part to "gain a lot of attention from the institutions." In that regard, the proposal has been a success. But only in that regard.

His amendment to the House budget calls for a study of a 2.5 percent 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.

Major research universities are the closest thing Massachusetts has to a goose that lays golden eggs. The nine schools in question employ a total of 27,000 people and pay $4.5 billion a year in wages and salaries, according to the Association of Independent Colleges and Universities in Massachusetts. They bring in brainpower and outside research dollars. They fertilize the local healthcare, technology, and financial-services sectors - three other cornerstones of the local economy. And like most higher-education institutions, the targeted nine are stabilizing forces, since enrollments generally do not drop even in lean times.

Kujawski says the 2.5 percent rate was inspired by Proposition 2 1/2, the property-tax-control measure that often frustrates city and town officials. He thinks the assessment rate on the wealthy nine "wouldn't be significant enough to be damaging." But even Harvard would miss $840 million a year.

Wealthy private campuses make fat targets, and not just because of their exclusivity. For all the sophistication of their research, they often seem oblivious in their dealings with their host communities. And critics say the public doesn't get enough in return for private universities' tax-exempt status. In their business dealings, top-tier universities often behave more like corporations than street-level nonprofits.

But if communities want these schools to contribute more to public education, or make greater payments in lieu of taxes, or better incorporate community concerns into their construction planning, there are other ways to bring them around. Meanwhile, lawmakers have more sensible options for bringing spending and revenues in line, such as cutting earmarks, asking state employees to pay more of their health insurance, and raising the income tax.

The Legislature should abandon the endowment tax - an ill-conceived money grab that ignores how vital higher education is to the local economy.

05-09-2008, 08:01 AM	#4
pbleic New Member Join Date: Sep 2006 Posts: 23	I don't usually agree with the Boston Globe, but they are spot on (except for their last suggestion viz. raising the income tax). This is a nice quick summary ("Cliff's Notes). How to strangle an economy May 9, 2008 REPRESENTATIVE Paul Kujawski of Webster says his proposal to tax the endowments of the state's wealthiest universities and colleges was intended in part to "gain a lot of attention from the institutions." In that regard, the proposal has been a success. But only in that regard. His amendment to the House budget calls for a study of a 2.5 percent 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. Major research universities are the closest thing Massachusetts has to a goose that lays golden eggs. The nine schools in question employ a total of 27,000 people and pay $4.5 billion a year in wages and salaries, according to the Association of Independent Colleges and Universities in Massachusetts. They bring in brainpower and outside research dollars. They fertilize the local healthcare, technology, and financial-services sectors - three other cornerstones of the local economy. And like most higher-education institutions, the targeted nine are stabilizing forces, since enrollments generally do not drop even in lean times. Kujawski says the 2.5 percent rate was inspired by Proposition 2 1/2, the property-tax-control measure that often frustrates city and town officials. He thinks the assessment rate on the wealthy nine "wouldn't be significant enough to be damaging." But even Harvard would miss $840 million a year. Wealthy private campuses make fat targets, and not just because of their exclusivity. For all the sophistication of their research, they often seem oblivious in their dealings with their host communities. And critics say the public doesn't get enough in return for private universities' tax-exempt status. In their business dealings, top-tier universities often behave more like corporations than street-level nonprofits. But if communities want these schools to contribute more to public education, or make greater payments in lieu of taxes, or better incorporate community concerns into their construction planning, there are other ways to bring them around. Meanwhile, lawmakers have more sensible options for bringing spending and revenues in line, such as cutting earmarks, asking state employees to pay more of their health insurance, and raising the income tax. The Legislature should abandon the endowment tax - an ill-conceived money grab that ignores how vital higher education is to the local economy.