Jay Gonzalez Proposes $1B Higher Ed Tax To Fund Education, Transportation
Under pressure to deliver new revenues for promised education and transportation investments, Massachusetts Democratic gubernatorial candidate Jay Gonzalez is proposing a 1.6 percent tax on certain private higher education endowments, which he estimates would generate $1 billion.
Gonzalez plans to travel to Tuesday to Cambridge, where Harvard University and its $36 billion endowment is based, to formally offer his plan outside an MBTA station that serves the campus and city.
Governor Charlie Baker, his Republican opponent, has jabbed at Democrats this year with warnings that they would raise taxes while he would not, although Baker never took a pro or con position on an income surtax on the wealthy, or households with annual incomes above $1 million.
Harvard and Massachusetts Institute of Technology would pay $563 million and $210 million, respectively, under the plan, according to the Gonzalez campaign. The campaign pegged Harvard's 2017 endowment at $36 billion and MIT's at $15 billion. Another roughly $200 million would be collected, in the aggregate, from Williams College, Boston College, Amherst College, Wellesley College, Boston University, Smith College and Tufts University.
Democrats who control the Legislature have been eyeing revenue sources for years to pay for improvements to the MBTA and regional transit systems, roads and bridges, and education from pre-school and daycare through higher education. Gonzalez, who backed the now-disqualified millionaire's tax, now has a plan that could produce major funds before lawmakers take another run at passing a redrafted income surtax, which cannot happen until 2022 at the earliest.
The proposed tax on university endowments of more than $1 billion is a perennial proposal on Beacon Hill, an idea that private universities have bottled up by arguing that university systems are an economic engine that fuel jobs and local economies while financing many investments in local communities.
The Gonzalez campaign views the tax as a "fair share" proposal that would draw funds from universities that depend on public transportation systems, receive tax breaks associated with their non-profit status, depend on host communities for municipal services, and recruit students from the Bay State's K-12 system.
Under his plan, the tax would be applied each year to the average annual value of the endowment over the previous five years and the new revenues would be steered into a new Education and Transportation Investment Fund and used only on investments in transportation and education.
An official at the Associated of Independent Colleges and Universities in Massachusetts (AICUM), a trade group that represents private universities, called Gonzalez's proposal "a terrible idea."
"Our colleges and universities are clear drivers or the Massachusetts economy. Undercutting their ability to attract talent, to provide financial aid for students across the state, and to conduct breakthrough research is simply irresponsible," AICUM President Richard Doherty said in a statement Tuesday. "This was a bad idea when Republicans in Washington proposed it, and it is an even worse idea now."
During a May 2017 legislative hearing on a proposed endowment tax bill, Rob McCarron, vice president for state relations and general counsel at AICUM, said the proposed tax violates the equal protection clause of the constitution and does not meet "proportional and reasonable" standards for taxation since it would affect only nine, mostly larger colleges in Massachusetts. McCarron said endowment revenues are also often limited to specific uses.
The Massachusetts Nonprofit Network on Tuesday declared its opposition to the tax. "It's a bad idea - for Massachusetts, and for everyone served by nonprofits in Massachusetts," Jim Klocke, CEO of the nonprofit network, said in a statement.
The group said non-profits provide 550,000 Massachusetts jobs and deliver scholarships to students as well as free and subsidized health care and environmental, artistic, historic and cultural programs.
Cambridge Mayor Marc McGovern will join Gonzalez at the Harvard Square MBTA Station at 11 a.m. to announce the plan.
This report was originally published by State House News Service.