Stealing Harvard?

We’ve all heard about the large endowment over at Harvard University, which is usually mentioned within a sentence or two of the comment that Harvard doesn’t give scholarships. With $34 billion just sitting there, you can’t help but feel like Harvard is cheating someone.

Enter State Rep. Paul Kujawski, who thinks the State deserves a piece of that pie in the form of taxes.

“When an endowment exceeds our annual ($28 billion) state budget, you start to ask yourself: ‘When is a nonprofit no longer a nonprofit?’ ” said Kujawski, a Webster Democrat who wants to begin taxing large university endowments.

Kujawski hasn’t filed a formal proposal yet, but told the Herald he wants a sliding-scale tax on endowments larger than $5 billion. That would hit Harvard Рwhich has the nation’s largest endowment Рand the Massachusetts Institute of Technology, which has $10 billion on hand.

Kujawski said his proposal could add more than $1 billion to state coffers.

I can completely understand Kujawski’s concern, and his rationale for wanting to tax the Harvards and MITs out there, but it seems like what is going on here is just larger scale model for what happens to regular Americans–find out who’s got the money (meaning, the rich) and tax them. Clearly, Kujawski thinks that the state can do better with the money than Harvard can. Frankly, I’d almost be all for this proposal except for the fact that it puts the money into the wrong hands.

A recent congressional study found endowments earned $52 billion on untaxed investments in fiscal year 2006, costing the U.S. government $18 billion in lost revenues.

However, researchers found big endowments only spent 4.6 percent of assets on school needs. That’s below a 5 percent minimum that non-college foundations must expend annually to stay tax-exempt.

The study also found schools such as Harvard and MIT could have avoided 2006 tuition hikes had they used less than 0.1 percent of endowment assets to cover the increases.

If these endowments are not meeting their legal obligations to remain tax exempt, than I would agree that some level of disciplinary action would be appropriate–but that won’t please the likes of Kujawski. They see a big stack of cash and truly believe that the government can spend that money better.

It certainly seems silly for universities to be sitting on more money than God while they raise tuition on students who enter these universities accumulating large debt. Just because they can–even legally–doesn’t mean we can’t complain about it to our hearts content. We all want to keep as much of our hard earned money as possible, and just because Harvard has $38 billion, doesn’t mean they can’t do anything legal to keep their filthy hands on it.

That said, if they aren’t keeping up their end of the non-profit bargain, they should remedy that. If they need to spend atleast 5% of the endowment on school needs and they are only spending 4.6%, then I suspect they could be charged with back-taxes for every year they have been in arrears of their obligation. That would be fair. If they change their ways, and start using the full 5% of the endowment on school needs, then by law they can sit on that endowment as far as I’m aware.

AS weird as it is for me to be defending Harvard, as long as what they are doing is legal, it’s technically fair. They should be penalized for anything wrong they may have done and are still doing, but they also have the opportunity to remedy that situation–if they want to keep their cash.

Aaron Margolis is a life long resident of the Bay State, and works at an architectural firm north of Boston. Aaron has a Master of Architecture Degree from Boston Architectural College and is currently in the process of becoming of a Registered Architect.