DEMOCRATIC GUBERNATORIAL CANDIDATE Jay Gonzalez crafted a tax plan that attempts to draft off of the popularity of the millionaire tax, but instead of taxing well-to-do individuals he intends to tax nine wealthy, private colleges and universities.
Gonzalez is proposing a 1.6 percent tax on college endowments greater than $1 billion, an initiative he says will raise $1 billion a year that would go into a dedicated fund for education and transportation. The millionaire tax, which assessed a 4 percent surcharge on incomes greater than $1 million, also targeted education and transportation. The millionaire tax never made it on to the ballot because the Supreme Judicial Court ruled the question’s wording ran afoul of the state constitution.
Polls indicated the millionaire tax had the support of 60 to 70 percent of Massachusetts voters. Gonzalez said his proposal would require approval of the Legislature, which he said was likely to be supportive because of its previous votes to put the millionaire tax on the ballot. “They’re already on record as saying we’ve asked those in this state who are doing well to pay more in taxes to address these critical needs,” he said at a press conference near the entrance to the Harvard Square T station in Cambridge.
Gonzalez’s tax plan is similar to an initiative passed by Congress last year that imposes a 1.4 percent tax on investment income generated by larger college endowments. The congressional provision was much smaller in scope than Gonzalez’s plan; it was expected to raise $1.8 billion over 10 years from 35 institutions, including Harvard, MIT, Amherst, Williams, Smith, and Wellesley. Gonzalez’s plan would target those six Massachusetts institutions, plus Boston College, Boston University, and Tufts.
Asked if he supported the GOP tax on college endowments, Gonzalez said he supported it more than many of the other provisions in the tax plan. He said his plan is designed to address pressing needs in Massachusetts, while the GOP endowment tax was intended primarily to offset tax cuts for the wealthy.
The parallels with the Trump tax plan created an interesting political dynamic. Last week, Gonzalez tried to tie Baker to President Trump using the governor’s endorsement of Republican US Senate candidate Geoff Diehl, a big supporter of Trump. On Wednesday, Baker tried to turn the tables, by slamming Gonzalez for supporting a tax initiative similar to the one backed by Trump.
“When President Trump proposed taxing college and university endowments earlier this year, I was opposed to it because the vast majority of the money that is used in endowments supports scholarships and financial aid – most of the time for low-income and middle-income students,” Baker said. “When President Trump proposed this idea, I thought it was a bad idea then, and I still think it’s a bad idea.”
US Sens. Elizabeth Warren and Ed Markey have also raised concerns about the GOP tax on endowment income, for many of the same reasons Baker did. Warren, who supports Gonzalez, said in November 2017 that a tax on university endowments was not a good idea. “Nonprofit college endowments should fund things like tuition reduction, basic research, and scholarships for students — not giant tax cuts for rich Republican donors and giant corporations,” she said.
A Warren spokesperson said the senator opposed taxing nonprofit colleges to provide billions in giveaways to the wealthy during the GOP tax debate. “She strongly supports investments in affordable education and infrastructure, believes there are a number of ways to do so, and applauds Jay for starting this conversation about ways to invest in Massachusetts,” the spokesperson said.
Pushing new taxes is rarely a popular gambit, but Gonzalez had to come up with a plan to help pay for all the new spending initiatives he has been proposing. In coming out with his proposal to tax college endowments, he said the wealthy should pay a little more.“Nonprofit institutions have accumulated enormous wealth in part because they are not subject to taxation,” Gonzalez said. He said the endowment tax rate he is proposing is only a third of the average annual growth rate of the worst performing endowment of the nine Massachusetts schools. Harvard’s endowment is the largest, at approximately $37 billion.
“There’s a very clear choice in this election, a choice between someone who’s perfectly content with the status quo and who has no vision and no sense of urgency, and someone who will fight every single day to make a difference in regular people’s lives,” he said.