( – promoted by Cool Cal)
Almost two years ago, I warned those who longed for a Democrat president to compliment a Democrat House and Senate, look no further than the great example that would be the Commonwealth of Massachusetts. Start with carpetbagger Governor Deval “Together we can” Patrick and a fiscally undisciplined legislature, and the money mess was the writing on the wall.
While overturning previous Romney-era fiscal vetoes (that gave us a billion dollar-plus surplus), and now rewarding us an almost billion dollar deficit overnight, Massachusetts is eagerly looking for more businesses to soak for revenue, and justified or not, they now have their eyes on tax-exempt endowments from colleges.
According to The Boston Channel,
It’s all part of a plan being discussed on Beacon Hill aimed at finding new revenue for the state budget. Lawmakers are considering taxing endowments at huge universities and colleges around the state. House representatives have a proposal that would impose a 2.5 percent tax on endowments that exceed $1 billion.
An example of how much the top schools would pay if the state adopted such a plan would require Harvard, with its $34.9 billion endowment, to pay $875 million to the state. The Massachusetts Institute of Technology, with its $9.9 billion endowment, would pay $247 million to the state. Boston College, with its $1.75 billion endowment would pay $43.75 million in new taxes to the state.
To be fair, Congress is also looking into this latest example of Robbin’ Hood politics.
That irks Sen. Chuck Grassley, R-Iowa, who has suggested colleges with endowments of $500 million and up be required to spend 5% each year, just as private foundations must, and use it “to help families and students afford college.” Under that rule, 141 colleges this year would have been affected, up from 97 in 2003.
“I don’t begrudge them their financial success,” he said in a statement. “I just want to remind them that their money is tax-exempt. They’re supposed to offer public benefit in return for (that) exemption.”
Now while the huge endowments are in the crosshairs, many in government who apparently know little about balancing their own books, are aiming at some of those college gifts as a way of balancing their books, now in the red. Some are also arguing that colleges should spend more of those funds to justify their tax-exempt status.
Lynne Munson, an adjunct research fellow at the Center for College Affordability and Productivity who testified before Congress on the issue last fall, said Harvard could allow its students to attend for free for just $300 million, a fraction of last year’s return.
Colleges have received endowment donations for centuries, but they aren’t monies just up and donated with no specific purpose.
Randy Livingston, vice president for business affairs and the University’s chief financial officer, explained that Stanford’s endowment has been built up through the support of donors who have specific requirements for their donations. He explained that the donors usually require that the gift must be invested and held in perpetuity, with only the investment income expended each year to support the gift’s purpose.
Additionally, the endowment is composed of over 6,000 distinct funds, each of which has different restrictions imposed by the donors. Some of the endowment funds are designated to support undergraduate scholarships or graduate fellowships, while others support faculty salaries through endowed professorships, specific areas of research, academic programs, centers and institutes.
I find it ironic that politicians who lack the ability to balance their own books, are not only telling private businesses how to run themselves, but also seek to jack their funds as “needed” sources of revenue. The only reason they’re needed is because legislators failed to spend the public’s tax money responsibly, and in Massachusetts, are chasing profitable businesses out of state because the cost of doing business here increases every time the gavel is pounded.
Sure, colleges could do more to help cash-strapped students attend, but confiscating their investments will do nothing but slow future donations, and should those investments start to tank in the markets, fewer students will receive aid. And I contend, if not for the habitual fiscal irresponsibility of state and federal lawmakers, we would not be having this discussion.
As long as politicians can find people or businesses to soak for “revenue”, they have little incentive to balance their books. As the elected, their jobs are safe, they have the means to send their kids to colleges, and many are only required (as a perk) to pay the taxes on state tuitions.
But as legislator take-from-the-rich-to-balance-their-budget attempts persist, they will not be forced to stop making promises they can’t pay for, and creating dependents so those created constituents can expect even more entitlements. Present Beacon Hill attempts to lure businesses, like casinos purely for the “revenue” they’ll create, to the state have backfired. All that’s left is to take money from institutions that are stuck here, for now. More are leaving everyday, and those that remain will find ways to either shield or reduce their rainy day funds. Employees, students, and ultimately the public, will suffer.
A President Obama or Clinton, along with a Democrat Congress, will have a field day playing Robbin’ Hoods. The examples are plain for all to see.