Democrats on Beacon Hill, unions, and a coalition of other liberal groups have come up with a new way to grab more tax dollars.
Invoking concerns over income inequality, they are proposing to jack taxes on the state’s richest residents as a way to pay for education and transportation. The bill, known as the “millionaire tax,’’ is designed to hit people who earn over $1 million with an additional 4 percent surtax. Supporters estimate it providing an extra $2 billion to state coffers.
I’m no fan of hitting up rich people to redistribute wealth and underwrite higher state spending, but I’ve got another bone to pick with this bill. Although sponsors call this the “Fair Share Amendment,” they’re targeting one group of wealthy people while giving a free pass to another group of Greater Boston residents with multibillions of tax-free dollars at their disposal: private colleges and universities.
These incredibly wealthy institutions pay not a penny of tax on their super-sized endowments. Aside from any voluntary payments these universities make, their nonprofit status amounts to a tax shield, even though they look and act a lot more like private corporations these days.
Harvard leads the list of largesse, touting a mind-boggling $37.6 billion in endowment funds. To put things into perspective, Governor Charlie Baker’s Fiscal Year 2017 budget proposal to run the entire Commonwealth of Massachusetts for a year is only $39.6 billion.
In 2008, a plan to levy a 2.5 percent tax on endowments over $1 billion was proposed, unsuccessfully, on Beacon Hill. It was estimated then that it would have brought in close to $1.5 billion a year to state coffers. That’s pretty close to the amount the current proposal for a millionaire tax would garner.
Kevin Casey, Harvard’s then-associate vice president for government, community, and public affairs told the Globe, “You’d be taxing success here. . . . Over time, this would put us at a real competitive disadvantage, which would drastically hurt the Commonwealth.”
One could make Casey’s same argument about the Fair Share Amendment. Wealthier Massachusetts residents could consider picking up stakes should they be targeted for additional taxation. But Harvard, Boston University, and Boston College definitely aren’t going anywhere.
Democrats love to say the system is rigged and that millionaires should pay just a little bit more. They’re right. The system is rigged — in favor of private universities that charge students hundreds of thousands of dollars in tuition while enjoying tax-free savings to help fund college operations.
As a Republican, I’m not one to push for raising taxes to make the state budget work from year to year. But at some point the state will need more dollars to make schools and roads the best they can be, and that means someone will be asked to pay more. As long as colleges and universities continue to enjoy a free pass from legislators to sit on gargantuan endowments tax-free, it’s tough to argue that individual taxpayers ought to be the first target for more revenue, no matter what level of financial success they have achieved.
You could call that Fair Share 101.Meredith Warren is a Republican political analyst and consultant.