Saturday, May 10, 2008

Those Crazy Politicians and University Endowments

The Wall Street Journal is reporting that Massachusetts is contemplating a 2.5% state tax on university endowments in excess of $1 billion per university (via Greg Mankiw's Blog). Now personally, I could care less about Harvard's financial concerns. It's hard to worry about a school with a $34 billion endowment. I'd be happy if my net worth was half that amount.

Here's an idea that would take some of the wind out of these legislative proponents' sails. Harvard could take 2% of their endowment each year and give it to their 19,000 undergraduates and graduate students. This is surely a fraction of the annual interest Harvard makes on its investments each year.

This would amount to over $35,000 per year per student and would essentially give them free tuition. Of course the B-school students would still have to cough up about $7,000 more per year but well...they're B-school students. They'll be able to pay that off after their first few weeks of gainful employment.

Massachusetts would have an awfully hard time taxing such "good" citizens as the Harvard administrators for providing a world class education for free.

I don't know. 2.5% going to taxes vs. 2.0% going to their own students? Seems like a no brainer to me. Maybe the legislature is threatening the universities with this tax just to achieve this end. Either way, it seems like an abuse of their authority to me.

More on my thinking about government meddling in the affairs of private universities (non profit organizations) here.



Blogger Ebuff said...

While I understand it is not their obligation, I completely concurr that places like Harvard should be more giving to the students that they proclaim to be what makes their programs. Of course, going to HMS next year probably means I'm a bit biased.

June 04, 2008 6:57 PM  

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