Massachusetts Democratic gubernatorial candidate Jay Gonzalez has proposed levying a new tax on private college endowments over a billion dollars as a way to raise funds to make public college tuition less expensive. Gov. Charlie Baker opposes such a tax — just as he has resisted new taxes in general.
It’s unclear how Gonzalez’s proposal is going over with the state’s voters, who will decide Tuesday whether to re-elect Baker to a second term.
Gonzalez has pushed imposing a 1.6 percent tax on private colleges with endowments that exceed a billion dollars. More than half of the new revenue would come from Harvard University, just blocks from where Gonzalez announced his plan in Cambridge last month.
“These nonprofit institutions have accumulated enormous wealth, in part, thanks to the fact that that they are not subject to taxation,” Gonzalez said at a news conference then.
The tax would raise more than a billion dollars a year from nine private colleges and subsidize the cost for public college students through scholarships.
“This investment will help us make our public universities and colleges affordable and debt-free for any resident eligible to attend,” he said.
Starting this year, the federal government is imposing a slightly smaller tax on the investment gains of the largest college endowments. That provision of the Republican tax bill that President Donald Trump signed last year applies to six colleges in Massachusetts: Harvard, MIT, Wellesley, Amherst, Williams, and Smith. Harvard's $37 billion endowment is the largest of any college in the country.
Gonzalez’s proposed state tax would be levied on those colleges as well as Boston University, Tufts, and Boston College.
Baker has opposed both the federal tax and the state tax Gonzalez has in mind. He called taxing endowments bad public policy.
“I don’t think we should be punishing colleges and universities. I think we should be investing in them,” Baker said in a WBZ-TV debate Oct. 9. “The colleges and universities here in the Commonwealth are a major economic engine — a significant employer — and they do wonderful things to promote discovery, research and learning."
No statewide poll has been published showing how the state’s voters feel about taxing college endowments. A national WGBH-Abt Associates survey conducted in August found 55 percent of Democrats said endowments should not be taxed, while Republicans and Independents were closely divided on the issue.
Former secretary of education Paul Reville, who served under Democratic Governor Deval Patrick with Gonzalez, said he agrees with Baker.
“The reason Democrats widely opposed this kind of proposal when it came forward in the Trump administration was to say, ‘Well this is part of deliberate attack on higher education and particularly on those institutions that harbor faculty members who have critical views of the administration,'” Reville said. “Now we have right in our home base a leading Democratic candidate — former cabinet colleague of mine — proposing something that you have to think is opportunistic.”
Gonzalez was secretary of administration and finance under Patrick.
Opportunistic perhaps, but maybe an idea that has some populist appeal, said Drew Nichols, a research director at The Education Trust, a national nonprofit based in Washington, D.C. that advocates for equity in education and has not taken a position on taxing endowments.
Nichols said his research finds 4 percent of colleges hold 75 percent of their total endowment wealth.
“There is certainly a crisis in terms of college costs, and so you're seeing folks take on a lot of debt to go to college, and there seems to be in some places a lot of resources that could really help alleviate some of that burden,” Nichols said.
For that reason, Gonzalez said most voters he has met on the campaign trail support his tax proposal.
“The only people who’ve expressed concern to me are people associated with universities,” Gonzalez said.
The Association of Independent Colleges and Universities in Massachusetts opposes the tax, pointing out that the state’s private colleges employ more than 100,000 residents.
Should Gonzalez defy the polls and be elected, he would need support of the state’s lawmakers and possibly the courts to enact an endowment tax.
