Massachusetts Legislation Would Tax University Endowments

Bloomberg reports that state legislators in Massachusetts are considering two bills that would target Harvard and other wealthy universities and colleges. Here is a description of the bills from the article:

One would hit Harvard and 10 other private colleges that have more than $1 billion in assets, including the Massachusetts Institute of Technology and Williams College, with an annual 2.5% excise tax to fund state universities. A second bill would charge a fee on rich colleges that give legacy applicants a leg up in admissions and pass along the funds collected to community colleges.

The first bill appears to be H.2824 (parallel bill S.1834), introduced almost a year ago and currently under consideration by the Joint Committee on Revenue. The revenue it would generate would be used for broader purposes than the above quote indicates, as it would go to a state-administered fund to “be used exclusively for the purposes of subsidizing the cost of higher education, early education and child care for lower-income and middle-class residents of the commonwealth.”

The second bill appears to be H.3760 (parallel bill S.1819), introduced last April and currently under consideration by the Joint Committee on Higher Education.  It would impose on schools that violate the legacy admission rules it creates a sliding scale percentage tax for their endowments based on the endowment per student, ranging from 0.01% for schools with an endowment per student of less than $50,000 up to 0.2% for an endowment per student of more than $2 million, with a minimum amount owed on endowments of more than $1.5 billion. There has also been at least one other bill introduced targeting legacy admissions by public universities, H.1282 (parallel bill S.821).

Lloyd Mayer