Jay Gonzalez: Tax Harvard; Charlie Baker: Bad Idea
By State House News Service | September 19, 2018, 17:24 EDT
By Matt Murphy
STATE HOUSE NEWS SERVICE
Democrat for governor Jay Gonzalez said his plan to tax the endowments of wealthy private universities should not inhibit schools like Harvard University from funding research and financial aid, two reasons Democrats like U.S. Senator Elizabeth Warren opposed the idea when President Donald Trump offered it last year.
Gonzalez, who has been under pressure to detail how he would raise revenue to pay for his campaign promises, pitched a plan Tuesday to generate nearly $1 billion in state revenue by taxing the endowments of the state’s nine wealthiest colleges and universities.
The money, the Democratic gubernatorial candidate said, would be put toward education and transportation to accelerate improvements to the Massachusetts Bay Transportation Authority, roads, and bridges and make affordable preschool and debt-free public college tuition more accessible to families.
“It is time for them to pay their fair share to help make our economy work for everyone in this state, not just those at the top,” Gonzalez said at a press conference outside the Cambridge Red Line station, steps from Harvard Yard. He was joined by Cambridge Mayor Mark McGovern and Quentin Palfrey, the Democratic nominee for lieutenant governor.
Governor Charlie Baker, who is under pressure to improve MBTA service, immediately rejected his opponent’s plan as one that would take financial aid away from deserving students, echoing concerns raised by Warren, U.S. Senator Ed Markey, and other Democrats when an endowment tax became part of the GOP tax cut plan.
“I start with the proposition that when President Trump proposed this idea, I thought it was a bad idea then, and I still think it’s a bad idea,” Baker said. Warren, who has been campaigning with Gonzalez, could not be reached for comment.
The 1.6 percent tax, according to Gonzalez, would be a “modest” levy on private institutions that have accumulated “enormous wealth,” in part because of their tax-exempt, non-profit status. The tax would apply to the endowments valued at more than $1 billion.
“This modest tax will raise meaningful new revenue to address critical needs in education and transportation that will benefit regular people throughout this state while still allowing the schools’ endowment and wealth to grow over time to support their own purposes,” Gonzalez said.
Gonzalez said the tax rate he is proposing amounts to just one-third of the average annual growth rate of the worst-performing endowment of the nine impacted schools, which would be Wellesley College’s endowment.
The Gonzalez campaign said it consulted with groups like Service Employees International Union and state Senator Jamie Eldridge (D-Acton) on its development of the plan, as well as with economists whom the campaign declined to name because they work for universities that would be affected by the tax.
Baker said he opposed the plan “because the vast majority of the money that is used in endowments supports scholarships and financial aid, most of the time, for low-income and middle-income students.”
The governor added, “And we did manage to make major investments in the Department of Children and Families, and our transportation system, and in education without raising taxes.”
Gonzalez released his tax plan the same day that the Commonwealth Future super PAC went up on statewide television with a new ad contrasting Baker and Gonzalez’s approached to taxes. The super PAC reported spending $1.6 million on an ad buy in its most recent report, backed by another substantial donation from the Republican Governors Association, which has now poured $4.56 million into the Massachusetts governor’s race.
The ad credits Baker for building a $1 billion surplus while holding the line on taxes, in contrast to Gonzalez’s “long history of supporting tax increases.”
A WGBH poll released this week found that 50 percent of Americans oppose taxing university endowments, while 43 percent support the idea.
Gonzalez said his proposal was not poll-tested, but was a “fair” way to address “critical needs in the state.”
“I’m sorry, but Charlie Baker’s insistence that we don’t need to invest more in our transportation system, his plan to make the T work for people in 15 years is totally unacceptable. People are going to have a choice,” Gonzalez said.
Private colleges and universities quickly came out in opposition to Gonzalez’s proposal, suggesting the endowment tax threaten colleges’ status as local economic drivers. The Association of Independent Colleges and Universities in Massachusetts said private higher education in the state employs more than 100,000 people, pays over $9 billion in salaries, and awards more than $608 million in financial aid.
“These institutions are repeatedly cited as the number one reason why so many companies want to be part of Massachusetts’s innovation economy, further supporting economic development priorities and growth statewide,” said Richard Doherty, president of the colleges association. “Taxing endowments is bad for students, bad for our economy, and bad for Massachusetts.”
Harvard deferred to AICUM’s statement when asked for a response to Gonzalez’s proposal.
However, PHENOM executive director Zac Bears said the endowment tax would actually help families pay for college by providing more funding for public universities. PHENOM is a coalition of students, faculty, families, and small businesses that advocate for debt-free public college.
“In contrast to self-serving claims by private college and university lobbyists, this investment in the public good will help Massachusetts families struggling to pay for college,” Bears said in a statement. “This will benefit the Massachusetts economy by cutting the cost of college and alleviating some of the pressure from the student debt crisis.”
PHENOM said the endowment tax should be part of a “larger revenue strategy,” including an income surtax on wealthy residents. Gonzalez said he supports the concept of a millionaire’s tax, but is now focused on this new proposal, which would deliver revenue quicker than the four-year process of trying to amend the state’s constitution.
An initiative petition advanced by the Legislature that would have taxed income over $1 million at a higher rate was knocked off the ballot this summer by the Massachusetts Supreme Judicial Court, which ruled earmarking the money, as the ballot question sought to do, violates the state constitution. Supporters wanted to earmark the new revenue for education and transportation.
The Raise Up Coalition, which was behind that ballot campaign, endorsed Gonzalez’s endowment tax.
“Creating an economy that works for all us is only possible if we all contribute our fair share. That includes wealthy tax-free institutions with billions of dollars of investments,” the group said in a statement.
Gonzalez did not detail how he would like to see the $1 billion in new revenue divvied up between education and transportation programs.