Democrats hesitant on Gonzalez’s plan to tax big university endowments
When Republicans proposed hitting college endowments with a new tax last year, the response from Massachusetts Democrats was at once swift and fierce.
US Senator Elizabeth Warren panned the plan as “completely backwards,” saying endowments are designed to fund things like tuition aid and research.
US Representative Michael Capuano warned it could trickle down to the construction industry, whose companies build the state-of-art labs and academic centers those endowments fund.
Citing rising higher education costs, US Senator Edward Markey wrote in a letter last year that elected lawmakers “should not be taking from nonprofit education institutions.”
Now Jay Gonzalez, their party’s choice for governor, is proposing to do just that, releasing on Wednesday a plan that would collectively tax Harvard University, the Massachusetts Institute of Technology, and the state’s other richest schools a billion dollars annually.
The levy, Gonzalez said, would be a “modest” 1.6 percent tax on endowments of any private, nonprofit college or university that has a fund of more than $1 billion. It would be applied to the average value of the endowment over the previous five years.
That’s a more aggressive step, experts say, than what congressional Republicans pushed when they enacted a 1.4 percent tax on the investment earnings of high-endowment institutions.
The goal, Gonzalez said, is to fund investments in transportation and education, such as fixing the Massachusetts Bay Transportation Authority and expanding prekindergarten, without raising taxes directly on residents. It drew plaudits Wednesday from progressive lawmakers and organizations such as Raise Up Massachusetts, which pushed efforts for a so-called millionaires’ tax ballot question before it was struck down by a court ruling.
“Creating an economy that works for all of us is only possible if we all contribute our fair share,” the group said. “That includes wealthy tax-free institutions with billions of dollars of investments.”
Colleges, as nonprofits, don’t have to pay property taxes to cities and towns. Although some municipalities ask the schools to contribute money to cover local services that they use, few pay the full amount.
His decision to target wealthy colleges appears to put Gonzalez at odds with the posture Democratic leaders took less than a year ago on Capitol Hill.
Gonzalez, speaking at a Harvard Square news conference Wednesday, did not directly address questions about whether he disagreed with Warren and others on targeting college endowments.
“I believe, based on the way that we have proposed this, that this will enable these institutions to provide real meaningful help to our economy . . . while still enabling them to carry out their really important mission,” he said.
Asked for his stance on the federal tax, he replied,“I support it more than everything else in that tax plan.”
His proposal drew an immediate rebuke from Governor Charlie Baker, the Republican he’s challenging, who said he opposed taxing endowments when President Trump and other Republicans first pushed it. “I thought it was a bad idea then, and I still think it’s a bad idea,” Baker said. (In notable timing, a super PAC that backs Baker released a TV ad Wednesday that says he has “held the line on taxes,” though Baker has signed new levies into law.)
Among Democrats — including those who blasted the federal plan — Gonzalez’s pitch drew a cautious, if noncommittal, response. Warren’s campaign said that during debate on the Republican tax plan, she opposed taxing nonprofit colleges as a way to “provide billions in giveaways to the wealthy.”
“She strongly supports investments in affordable education and infrastructure, believes there are a number of ways to do so, and applauds Jay for starting this conversation about ways to invest in Massachusetts,” her campaign said.
Markey’s office, too, sought to draw a line between a “Trump tax” on endowments and Gonzalez’s plan to fund state priorities. “Senator Markey thanks Jay Gonzalez for starting this important discussion and highlighting the priorities that Republicans refuse to invest in,” said Giselle Barry, a Markey spokeswoman.
Boston City Councilor Ayanna Pressley, who defeated Capuano in a Sept. 4 primary to become the Seventh District’s next congresswoman (there is no GOP candidate), provided perhaps the strongest level of support, saying Wednesday that she “believes the wealthiest private institutions must do more to support the communities they call home.”
“She looks forward to working in partnership with him and institutions of higher education to find sustainable solutions,” said Sarah Groh, Pressley’s campaign manager.
On Beacon Hill, similar proposals have emerged before, including this year, when bills in the House and Senate calling for a 2.5 percent tax on funds in excess of $1 billion were sent to study, in effect killing them.
House Speaker Robert A. DeLeo’s office said he was aware of Gonzalez’s plan and looks forward to seeing details. Senate President Karen E. Spilka said she commends Gonzalez “for daring to ask the important questions.”