Does Harvard have constitutional protection from Gonzalez tax?
John Adams gave university special status, but taxation waiver is unclear
THINGS LOOK TOUGH enough for Jay Gonzalez’s proposal to tax high-value university endowments, with lots of leading Democrats offering a less than enthusiastic embrace of the idea. But could the idea face an even bigger barrier – the Massachusetts Constitution?
Gonzalez, the Democratic nominee for governor, has proposed levying a tax on the endowment of all Massachusetts universities and colleges with holdings greater than $1 billion. Such a measure would apply to nine higher education institutions in the state, but Harvard, the world’s wealthiest university, would be hit for $563 million, more than half of the $1 billion the measure would raise.
A potential obstacle to the plan, however, is that Harvard is enshrined in the Massachusetts Constitution, written by John Adams, with language providing it with certain rights. Indeed, an entire chapter of the state’s foundational text is titled, “The University at Cambridge, and Encouragement of Literature, Etc.” Three separate articles within the chapter spell out various rights to be enjoyed by the institution where “many persons of great eminence have, by the blessing of God, been initiated in those arts and sciences, which qualified them for public employments, both in church and state.”
James Segel, an attorney and well-known Democratic insider who served as a Brookline state representative in 1970s, said he explored the idea of taxing colleges and universities to pay for local services while in the Legislature, but was told the Massachusetts Constitution precluded such a levy.
The relevant passage, he said, refers to “immunities” Harvard is granted. “[I]t is declared,” reads the Constitution, “that the President and Fellows of Harvard College, in their corporate capacity, and their successors in that capacity, their officers and servants, shall have, hold, use, exercise and enjoy, all the powers, authorities, rights, liberties, privileges, immunities and franchises, which they now have or are entitled to have.”
If those immunities included an exemption for Harvard from taxation, such a right would appear to remain in place today.
“If I were counsel to the university, I’d say there are some arguments to make about why that proposal [of Gonzalez’s], at least as it applied to Harvard, might not be successful,” said Lawrence Friedman, a professor at New England Law – Boston.
But Peter Enrich, a professor at Northeastern University School of Law, said he doubts the language in the Constitution would protect Harvard from Gonzalez’s proposal, which would apply an annual tax of 1.6 percent on the value of all college and universities endowments greater than $1 billion.
For the university to have such protection, he said, there would have to have been an exemption in place from any taxation at the time the Constitution was approved in 1780. The one exemption that has been cited, he said, which came up in a 1828 case before the Supreme Judicial Court, derived from a colonial law from 1650 stating that “all lands, tenements, or revenues of Harvard College, not exceeding the value of 500 pounds per annum, are exempted from taxation.”
“I have considerable confidence that Harvard would litigate the issue,” said Enrich. But he doubts the university would prevail. “I think they would have a hard time applying any of that to an endowment,” he said of the constitutional provisions.
Harvard declined to comment on the proposal or on the constitutional issues it might raise.
“I am highly skeptical” of any claim that Harvard’s endowment cannot be taxed, said Sullivan, who later served for 10 years as counsel to the state Senate and as general counsel to the Executive Office for Administration and Finance during the Patrick administration when Gonzalez served as secretary.
He acknowledged that there is not legal certainty surrounding the relevant wording crafted in the 17th and 18th centuries. “There is no decisive, on-point holding by the Supreme Judicial Court on this issue,” said Sullivan. “But there is no holding that Harvard is protected from this plan of Jay’s either.”
For his part, Gonzalez expressed confidence that the plan would pass constitutional muster. “I’m confident that my proposed endowment tax on Harvard and other institutions is legal,” he said. “It’s fair to ask the wealthiest among us – including major institutions that have accumulated enormous wealth in part thanks to their exemption from taxation – to contribute to our greater community.”
Gonzalez said he wants to use the revenue raised from an endowment tax to pay for needed transportation upgrades and to support education, including the K-12 system, which a state commission said is being badly unfunded.
One irony were a legal case ever to surface over his plan: The same chapter of the state Constitution that Harvard might cite in arguing it cannot be taxed includes a provision that been cited in landmark cases calling for more public spending for K-12 schools, the very thing Gonzalez wants to do with money from big endowments.“[I]t shall be the duty of legislatures and magistrates, in all future periods of this commonwealth,” it reads, “to cherish the interests of literature and the sciences, and all seminaries of them.”