Massachusetts Has Great Idea, A College Endowment Tax

Specifically, the measure calls for a 2.5% tax on any endowment in excess of $1 billion.

Massachusetts has 9 colleges and universities that meet this criterion, with Harvard's endowment of $35+ billion leading the list, and it would be expected to raise $1.4 billion for Massachusetts.

There are a number of reasons that I think that this is a good idea, the first is that Greg Mankiw, former head of Bush's Council of Economic Advisors hates the idea with a passion, and if a Bushie opposes an idea, you are unlikely to be wrong supporting it.

The second, and more logical reason, is that these endowments are so excessive as to run counter to the goals of these institutions as educational non-profits.

Brad Delong, a Harvard Alumni, runs the numbers, and notes that over the past 50 years, Harvard's graduation rate has gone from 1200 to 1600/year (which means that there is $5.5 million of endowment for each student there), while the UC starting from 5000/year created many more educational openings, both through expansions at UC Berkeley and UCLA, and by improving other parts of the UC system noting that, "Today we have UC Davis, UC Merced, UC Santa Barbara, UC Santa Cruz, UC Sunnydale^*, UC Irvine, UC Riverside, UC San Diego which together with UCB and UCLA graduate 40,000 undergraduates a year."

Matthew Yglesias, also a Harvard Alumni, says "Long story short if you, like me, are a graduate of a fancy college and the development people come around asking you for money don't do it save your money for institutions that (a) have less money and (b) do more to help people in need."

It raises an interesting point, specifically that endowments and foundations become a sort of charitable money pit, where the accumulation of more resources become a major, if not the major driving force behind institutional activities.

^*Never knew Delong was a Buffy fan.