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Harvard Faces New Threat of State Tax on $51B Endowment
- tomr_stargazer 3y agoI’m sure there’s plenty of unintended consequences that could arise (and I’m sure other commenters will point those out), but as a Harvard alum I am frankly in favor of this in principle. Though I’d also like to see other tax streams set up to support higher education, rather than making it a zero-sum game.
- fortran77 3y ago[flagged]
- rekttrader 3y ago“They” tell you.
- stanleykm 3y agohow else would you know?
- zaptrem 3y agoIt's fair for them to announce here as otherwise "I for one am cool with taxing [my] institution" is interpreted as "I for one am cool with taxing [that]"
- brvsft 3y ago[flagged]
- zaptrem 3y agoIt's like if a Yankees fan admits their team's payroll spend should be limited vs a Red Sox fan calling for that.
- brvsft 3y agoYou’re implying that everyone who doesn’t go to Harvard thinks of Harvard on the same level as a sports team RIVALRY, which is of course absurd. It’s more like someone whose allegiance to a team is unknown, saying he’s okay with NYC charging sales tax at Yankees games.
- neilv 3y agoThanks, sports team fandom is a good example of institutional loyalty. In this particular case, the analogy is also a little funny, since it could be used or interpreted as a put-down. Consider "town vs. gown" dynamics, and some movie caricature of Harvard blue blood person, implying that a local (Boston) townie would need a Red Sox analogy, to understand loyalty to the college a person attended.
- zaptrem 3y agoLol definitely unintentional. Originally I was going to go with “employee of corporation” but that wasn’t quite right.
- adastra22 3y agoThis is one instance where it was entirely called for though.
- oh_sigh 3y ago[flagged]
- VeryHungryMoose 3y ago[dead]
- gumby 3y agoHarvard and MIT are nonprofits so normally don't pay taxes (meaning property taxes, income taxes, etc -- they do pay payroll taxes and sales taxes). Between them and all the churches, quite a large percentage of Cambridge's property, especially commercially-zoned property, pays no tax at all. But for some reason, those two institutions just happen to make large donations to the city and state every year. Personally I'm neutral on taxing the endowment. I can't get around the paywall (archive.ph seems to be having trouble with bloomberg links today) so I don't know if this is an asset tax or a tax on realized gains. Given how the institutions use their endowments (they just hoard them to game the US News ratings, which is pointless for Harvard and MIT) it's probably good.
- brightball 3y agoWhy wouldn’t they pay property taxes? I thought nonprofits only escaped income taxes because it was often donations?
- KMag 3y agoIt's the other way around. It's the non-profit part of the donations to non-profits that relieves the non-profit from paying taxes on the revenue, not the fact that it's a donation. If you somehow made a voluntary donation to, say, your local bar, the bar would still be taxed on that revenue (assuming it's not somehow a registered non-profit bar).
- yieldcrv 3y agonon-profits pay property taxes on real estate holdings unless that state/municipality has an exception for non-profits in that regard too
- DonsDiscountGas 3y agoI believe Massachusetts does have that exception.
- ghaff 3y ago>But for some reason, those two institutions just happen to make large donations to the city and state every year. Because that's part of the deal those institutions basically cut with at least the city (don't know about the state) decades ago. It's pretty reasonable. They don't have to pay taxes and are arguably good for the city as a whole but, of course, they're dependent on a lot of city services. When you're as wealthy as they are, it's just sensible not to see how far you can push things in the direction of paying the least possible amount.
- rottencupcakes 3y agoWhat else to expect from the state of Elizabeth Warren. While I agree that university endowments are getting absurd, I also doubt that the government will make better use of them. What’s $5B to the Massachusetts government? Almost nothing - just 9% of the budget for one year [1]. These schools should leverage what they’re good at and put real resources to increasing access to education. More OCW courses. Or just do more research. [1] Massachusetts enacted its FY 2024 budget in August 2023. The budget reported $56 billion in general fund spending, an increase of less than 1 percent over the previously enacted budget. https://www.urban.org/policy-centers/cross-center-initiatives/state-and-local-finance-initiative/projects/state-fiscal-briefs/massachusetts#:~:text=Massachusetts%20enacted%20its%20FY%202024,different%20measure%20of%20general%20expenditures https://www.urban.org/policy-centers/cross-center-initiative....)
- verve_rat 3y agoSweet, want to give 9% of your salary to me?
- rghsrtgr 3y agoExactly. But to look more like a government you should point a gun at him when asking the question.
- rottencupcakes 3y agoIt’s not salary, $5B would be a one time 10% payment. Just a guess for the max they could extract. If you want to talk the actual bill, it seems to be for a 2.5% tax on investment returns, so actually pretty small.
- verve_rat 3y agoYou said it was about 9% of the state budget and that was next to nothing. If 9% is next to nothing then you should have no problems parting with next to nothing of your salary. I know that this would be a one time payment, I'm not asking you to sign up to tithing to me each year. I'll just get that next to nothing 9% from you the one time and be on my way.
- trollerator23 3y agoTaxachusetts strikes again
- tacticalturtle 3y agoAs someone who lives in the Boston area I think specifically the real estate holdings of these massive, non-profits should be held to scrutiny. Boston is pretty constrained in terms of available land - and its large number of expanding universities means that a good portion of it becomes tax-exempt. The city tried to implement a voluntary payment program to invoke the non-profits’ good will - but you can see for yourself that they rarely get what they asked for - Harvard only paid 80%: https://www.wcvb.com/article/complete-list-of-colleges-hospitals-and-museums-payments-to-bostons-pilot-program/45714164 https://www.wcvb.com/article/complete-list-of-colleges-hospi... Harvard now owns 1/3 of the Allston neighborhood in Brighton - which for decades had some of the cheapest housing in Boston. If it’s gentrifying, at least let the city capture some revenue.
- lettergram 3y agoYou can't make me think Boston doesn't have enough taxes, what are they spending it on? They have a $16B annual budget - https://budget.digital.mass.gov/govbudget/fy23/tax-expenditure-budget/ https://budget.digital.mass.gov/govbudget/fy23/tax-expenditu... The VAST majority of it comes from personal income tax, sales tax and corporate excise tax. Don't think Harvards $53B endowment is even relevant compared to that budget.
- skywhopper 3y agoYeah, what could it cost to run a city?
- choilive 3y ago[flagged]
- tacticalturtle 3y agoLet’s sidestep the legitimate uses of the money for now. These institutions in Boston are centuries old. Boston has a very finite amount of land. Allowing organizations with a lifespan in centuries the ability to buy and hold land without limit at no cost seems like a bad long term economic policy. What is the limiting factor on their growth?
- empathy_m 3y agoI wonder what would happen if (1) Massachusetts taxed nonprofit university endowments. (This would not directly improve services -- instead MA would cut personal income tax for the wealthy then reduce state funding for services like the legislature and governor did in 2023) (2) In retaliation, universities built huge quantities of housing throughout the state, using their Dover Amendment exemption to avoid all zoning requirements. They would have to simulate an eligible use. This would probably improve quality of life for communities - rents and home prices would go down due to the glut of new housing units.
- jncfhnb 3y agoMA has a flat income tax. Don’t see that changing.
- ProllyInfamous 3y agoCan we also start taxing churches, nationwide?!
- HideousKojima 3y agoAny church that engages in for-profit activities is already taxed. The only "special" treatment churches get is they're assumed by default to be non-profits while other non-profits have to apply for the status.
- InvertedRhodium 3y agoFurthering religious beliefs is a bonafide charitable act here in NZ, not just the assumption of non profit status. They don’t to feed the hungry, clothe the poor or do anything beyond converting other people to their religion in order to pay 0 taxes. That’s where I have an issue with it.
- burkaman 3y agoThey also don't have file a form 990 or provide any information about their operations, and there is no requirement that they benefit their community or society in any way. Both of those are unique to churches.
- edgyquant 3y agoNo, for one thing churches exist off of donations even if we wanted to tax them (which we shouldn’t, they aren’t businesses)
- jjtheblunt 3y agoThey’re definitely businesses sometimes: the Mormon church holds billions in investment properties that they profit off. An example of countless articles: https://www.wsj.com/articles/mormon-church-temple-spending-spree-utah-e167977f https://www.wsj.com/articles/mormon-church-temple-spending-s...
- 3y ago
- dantheman 3y agoEven though these institutions are facing internal problems, they're still better run and will probably out last whatever government is around them. We should be lowering government spending and lowering taxes, not trying to spend more.
- yieldcrv 3y ago100% These things have a target on them for pretending to be inclusive at all But the only reason for that is because the common person & industry decided that university degrees are necessary for workplace eligibility. This is a half century aberration that will go away as quickly as it came about, and these 400 year olds institutions will continue being their isolated elite trading cards for a whole millenium
- bas 3y agoAmusingly, and colloquially, Harvard predates the government by more than a century.
- anon373839 3y ago> We should be lowering government spending and lowering taxes, not trying to spend more. After seeing the inefficiency and incompetence of government bureaucracies for so many years, I’ve really come around to this idea. I don’t think we should have a libertarian free-for-all, because that carries its own problems. But I do think a great deal more policy could be effectuated through market-based mechanisms and private rights of action instead of clueless and corrupt functionaries.
- lmm 3y ago> Even though these institutions are facing internal problems, they're still better run and will probably out last whatever government is around them. No, you just hear more about the problems with government because they have much better accountability measures. Which is exactly why it's better for money to be taxed, and services run by governments, than these things handed over to the opaque and unaccountable NGO complex.
- happytiger 3y agoIf Harvard moves to Florida, that’ll be the signal.
- apengwin 3y agoif all those academics were as smart as we think they are, they'd start to question why they would ever live in Boston
- jjtheblunt 3y agoBecause they are paid massive salaries and live in subsidized areas courtesy of a tax exempt employer?
- labster 3y agoWe don’t need to worry about Florida nonprofits holding land for generations because it will all be under water.
- peterlada 3y ago[flagged]
- draw_down 3y ago[dead]
- Simulacra 3y agoA university with that much money really should not be taking tax dollars.
- heads 3y agoOn the one hand money in an endowment has presumably already been taxed at least once. Taxing it again is double taxation and that’s bad because once you allow money to be taxed twice, you have to be ok with it being taxed many times over — O(1) to O(n) if you will. The moral position of government would be that taxing the outcome of growth and wealth creation is fine, but retaxing existing money is the government breaking its covenant with the people. On the other hand I would accept the government’s position if it were to say aloud that there goal is for all large pools of money to be reclaimed by society. Double taxing wealth is then ok because it will, eventually, redistribute the wealth. In such a moral code, a $51bn pile of gold is quite an aberration. It is classic right versus left: natural hierarchy versus we’re all the same.
- maxerickson 3y agoLots of money in the endowment is investment earnings. Have those been taxed? I didn't check, but it seems like that information is important to your argument.
- altcognito 3y agoYou don’t tax the money twice, you’re taxing the earnings.
- heads 3y agoThanks, that’s an important detail. I guess it boils down to how much private wealth is too much, and what if anything should we do about it? An argument on Harvard’s side is that, in the grander scheme of things, they are part of a process that generates phenomenal tax revenue. The state takes their 40% cut off the top of every $150k CS and IB graduate salary after all. Is that a good enough benefit to let us tolerate Harvard’s pile of gold? There is a related argument that if society is to be the ultimate recipient of the majority of benefits of a university system, then it should probably be state funded. Just like roads (public) trains (ish) electricity (not any more) and food (private but subsidised).
- naijaboiler 3y agoI never buy this tax multiple times argument. My wages (money from labor) are taxed multiple times. But when it comes to money from capital, i start hearing this argument about double taxation being bad. What???
- gigatexal 3y agoOoooh. Now do churches!
- lofatdairy 3y agoSimilar thing in nyc where columbia and nyu are facing property taxes.
- StopTheTechies 3y agoI don't understand why these institutions are treated as "educational" rather than "investment funds" when they evidently act like the latter. I understand the legal protections, but why have politicians sat on their hands for the last thirty years while our education went to shit?
- BenFranklin100 3y agoSuch hypocrisy. Wealthy Cambridge MA - where Harvard and MIT are located - with all its $2M+ single family homes, has the lowest property taxes in the state. If we want to better fund state colleges, levy a state property tax on the well-off property owners. Warren herself lives a few blocks from Harvard in a multi-million single family home and could stand to pay a few more bucks percentage wise like us poorer people do.
- virtualwhys 3y agoTo be fair, for the Avon Hill area her place is pretty pedestrian, and like many in that neighborhood they've been sitting on their property for years -- the tax windfall for the state won't come until those property owners sell en masse, which is unlikely, it's one of the nicest areas in Cambridge.
- BenFranklin100 3y agoWealthy Cambridge MA has the lowest annual property taxes in the state of MA.
- m3kw9 3y agoAll implemented tax should be retroactive so they don’t move it around
- CaliforniaKarl 3y agohttps://archive.ph/sospe https://archive.ph/sospe
- cosmojg 3y agoIt's about time the State started taxing the Church's land. Seriously, imagine if that money were invested in creating value instead of hoarding inelastic goods. We would all get to see just that much more prosperity.
- safgasCVS 3y agoThe scales of money in Ivy League schools are just staggering. It’s not a university but a hedge fund that dabbles in education
- snapplebobapple 3y agoThe comments are mostly missing the point. The budget of harvard is almost 5 billion a year (this is a couple years old, I wouldn't be surprised if it was higher now) and it has a 50 billion dollar endowment with 25,266 undergraduate and graduate students. This is almost 200k/student/year in cost and 2 million/ student in endowment. If you compare to a school that also has a lot of fat but is still a top 100 university in the world that is subject to a different regulatory regime the University of Toronto, that has ~27k per student cost to run and roughly 27k per student in endowment. One can only conclude that Harvard is not a university at all, it's some weird new thing that is pretending to be a university for tax reasons and that tax protection should be annulled until the endowment is shrunk back down to something more reasonable like a year or less of operating expenses benchmarked against a real university like the University of Toronto.