Harvard is filthy rich, with a massive endowment of $32 billion and a constant influx of millions of dollars from wealthy alumni. It kind of skews the public perception of universities, too — no, most of us are nowhere near that rich, and are struggling to make ends meet. But I don’t think that’s enough just yet to justify taking away Harvard’s nonprofit status.
…from a purely utilitarian perspective, there are causes that need that $350 million more. Groups like GiveWell are devoted to figuring out where a dollar does the most good. It recommends initiatives like deworming in very low-income countries. Harvard, at the same time, is spending a billion dollars upgrading its coeds’ convenient, riverfront housing. If it wanted to maximize its $32 billion worth of utility, it could, say, admit more students, especially poor ones, reduce its focus on property development, and double down on its focus on research, which currently makes up $800 million of its $4.2 billion in annual operating expenses.
But there is a way to encourage the university to do that, or at least to ensure that it is also contributing more to the public good. That is to take away some of Harvard’s tax exemptions, as suggested by legislators in Washington and Massachusetts, as well as a number of economists. The idea is that such megarich schools hoard funds and real-estate, tax-free, to the detriment of local communities or federal coffers, a situation that could be remedied with a wealth tax on endowments over $1 billion, property taxes, or a tuition sales tax.
It is definitely true that the well-off universities could do a better job of advancing scholarly goals, rather than the endless cycle of money for money’s sake, churning so much of their income into the purpose of increasing their income further. That, supposedly, is what a board of trustees is supposed to do — guide the institution in making decisions in line with its mission.
But all I could think on reading this proposal is…why are you going after universities, which are promoting education and research, and not going after the massive tax-free boondoggle of the churches, which promote superstition and, lately it seems, priestly buggery? If you’re going to claim a high-minded dedication to seeing huge endowments used wisely, I’d like to see some judicious prioritizing of targets on your part first.
Some of those suggestions are just awful, too. A sales tax on tuition? That’s just going to get passed on to the students, and they pay more than enough already. In fact, from my non-Harvard perspective, the big problem in this country is that most universities have been starved of support, and have had to turn to scraping it out of their students’ pockets, leading to increasing student debt. Any proposal that aims to take away a portion of university revenue by any means is going to lead to increased hardship for the students.
Part of the problem here is the idea that a university is a commercial enterprise selling a commodity to customers, and therefore should have its budgets policed in the same way as a business, that is, on the basis of its accounting. Harvard is a weird outlier, so it’s unfair to judge higher education by its example, but even so, talking about a sales tax on tuition is revealing of an invalid perspective.
A university’s customer is society. Are we creating productive citizens with skills and interesting perspectives? Society as a whole should be investing in that process, and unfortunately in the US, we’ve got an electorate that likes the benefits but thinks they should be acquired for free, somehow. And Harvard should be milked like a cash cow rather than seen as a resource that ought to be shaped and encouraged.
The article was prompted by a huge donation of $350 million to Harvard, which seems extravagant. It was. I also think it was foolish. That’s a large drop in the bucket at a colossal concern like Harvard, and an investment in a single concern that turns out a small number of graduates. If wealthy donors really want to make a difference, rather than throwing buckets o’ money at institutions that already got lots, spread it around — look around the country for worthy universities that reflect your values, and give them your donations and make a real difference.
Like the University of Minnesota Morris. I can’t even imagine what a donation of hundreds of millions of dollars would do here — it would revolutionize the place. We might actually have an endowment that would allow for long-term growth and stability.
And not just UMM, but any of hundreds of colleges all across the country. You want your donation to make a difference in education? You’re nuts to give it to Harvard.
But taxing any higher ed institution? That’s nuts, too.
It actually strikes me as a vexing issue. We had a major fight here recently with the city of Providence over our contribution in lieu of taxes. Brown is the biggest enterprise in town, and owns a huge chunk of the most expensive real estate, through which run roads maintained by the city, which was broke. The mayor asked for more money and there was a shitstorm. We had firefighters picketing outside of our building. The president finally agreed to kick in a few more bucks, but she didn’t have to — she could have told him to go pound sand.
Compared to Harvard’s, our endowment is a flyspeck. But $3 billion isn’t chump change to most folks. And yes, we compete for students on the basis of amenities as much as a great education, and a lot of our revenue goes to pampering our already generally well-to-do students. (No, we don’t have need blind admission and our student body definitely tilts up-class.) So it seems to me there is a case to be made for a social interest in influencing how we spend our money; and that the city should have some enforceable claim on a defined contribution. I’m not saying I’ve figured out exactly how to do that, but mere moral exhortation doesn’t seem to be sufficient.
Sure, tax Harvard’s endowment. And tax the Cato Institute’s endowment. And tax the Bill and Melinda Gates Foundation. And yes, tax church endowments, you gave up that idea way too quickly. Basically, do away with the notion of tax exemptions. Instead introduce tax base minimums, the smallest amount of income etc. that is subject to the tax in question. Everybody who has the basic minimum for the tax should pay it, no exceptions, er, exemptions. I think the real argument is whether FAFSA or whatever it’s called should be doing more grants. (I think so.)
That still wouldn’t be as fair since property taxes are local. But I think it would be a good first step.
Harvard could easily afford to make its education available for free and / or make it available to a lot more students. Failing one or both of those things, yes, it should be hit with a stiff tax on its endowment above some generous allowance, let’s say 1 billion. (I say this as an alum.) That endowment is not currently being used in a way that benefits society sufficiently to justify they foregone revenue. As to the churches, they should receive exactly the same tax benefits as any non-religious nonprofit, no more, no less. For example, I like my (UU) minster a lot but he shouldn’t get a tax-free housing benefit not available to the head of a secular nonprofit (and yes, I would be willing to increase my pledge amount a bit to make him whole). But also for example, there is no reason why my church should be taxed in a way that, say, the Immigrant Worker Project of Ohio, whose work my congregation supports in multiple ways, is not.
Not to mention political advocacy.
Thomas Piketty mentioned this in his best seller, Capital in the 21st century.
Harvard’s endowment is one of the wonders of the modern world.
It’s not only 32 billion USD, their return on capital (r) is around 10%, at least double what the average is in the USA. No one is quite sure how they do it, but it is a great trick.
It’s thought to reflect economies of scale as they spend $100 million just managing their hoard. That still doesn’tell anyone much.
This looks a lot like needs testing for Social Security. It’s the first step to eliminating it. Although not precisely analogous, I see going after universities tax exempt/non-profit status as a first step to dismantling a public good. If you were to try to limit this only to Harvard or some other well-endowed entities then that brings about another problem. Once something is not for everyone it becomes something for the “less deserving,” (to use the right-wing’s favorite catch phrase). Divide and conquer.
We have to pay for the 08 crash and two pointless wars somehow. [/snark]
Did no one wonder how we could piss away trillions of dollars on two long wars then crash the economy without consequences? They’re coming after university endowments, they’re coming after our pensions, they’re coming after public sector unions. They’re not coming after filthy rich people who have profited the most. Funny how that works.
sadunlap @6, terrible analogy. Harvard is not a “public good”, it’s a preserve of the 0.1% which helps that class pass on its ill-gotten gains to its offspring. It does perform some publicly useful tasks but not in a way or to an extent that makes it sensible to allow it to pile up so much wealth.
Yeah, I’m immediately suspicious of aiming for that low-hanging fruit. Harvard is such an easy target. Why not an equivalent wealth tax on all individuals with a net worth over $10 million? Why not taxing the offshored profits of multinationals, or, at the very least, taxing unearned income at a higher rate than earned income, so that all the stockholders of the companies who offshore their profits and pay no taxes would have to compensate for that corporate greed by way of getting their own profits taxed fairly — 40 percent tax on all unearned income, both dividends and capital gains, starting tomorrow. And yes, of course, if you’re going to tax education, you should damn well tax religion.
There are lots of ways to bring in more revenues by taxing the wealthy and corporations — we just haven’t had the political will to do so since the Reagan administration. Harvard’s a nice target, and could surely afford the ding, while still giving a free ride to any student whose parents make less than $80K (I think that’s about the level below which Harvard is free), but it seems that something more insidious is behind the scheme, something that might be targeting institutions perceived as just a bit too liberal and fact-based and science-y and humanist….
How about a 60 percent profits tax on all corporations with more than 10,000 employees who pay any of those employees less than $15 per hour or don’t offer healthcare or pensions. But only 25 percent for companies that pay a living wage, full pensions, and healthcare. So the public wouldn’t have to subsidize the Walton kids.
My friend did a lot of humanitarian work in Africa. She spent a year there while in Peace Corps and then about 2 years afterwards with a different group.
She’s now associated with Harvard however. This means that rather than spending 100% of her time in Africa, she’s flying back & forth between Africa & USA every week or two. The justification is that she needs to be present at meetings stateside and only needs to supervise the work being done in Africa. All the travel back & forth is a colossal waste of their money and her time. She’d rather be in Africa working where she feels like she can make a difference. But Harvard was behind a program that she wanted to see advanced & they have the resources to do it. I once told her that they should hire a 0.5FTE manager to stay in the USA + a “good” Internet connection to her location for the cost of the airfare back & forth. As long as no one complains too loudly or asks too many questions, the stupid wastes of money will continue.
Really? I have a hard time believing you’d be comfortable with all the strings attached to a $350 million donation to UMM.
Or just allow the first $(2-3x the county poverty line) in wages, along with health benefits and pensions, as tax deductions for a company. I’m sure that would need to be fine-tuned, though…
Steve Labonne
Really? What does your church do that’s a thousandth as valuable to society as the Immigrant Worker Project?
abnheal
That said, healthcare and pensions alike should be a tax-funded matter, and not rely on employers at all. The other part still stands, though; there’s really no reason to let these parasitic assholes leech off any money, but if we’re going to let them, there need to be serious fucking restrictions on it.
If they’re that rich, can’t they do tuition gratis?
Since 2006, families with less than $60,000 total income have not been required to contribute to their student’s tuition, room and board. The student has been required to come up with $2000 in summer income/outside scholarship/loans.
I don’t know if those numbers have changed since then, but they do represent a substantial endowment commitment to educating lower income students.
I’m a 1971 graduate of Harvard College; interestingly, $2000 was the total room/board/tuition cost of my first year.
@12
You could ask the director of IWP, who is a good friend of the church- which has numerous members who volunteer in all sorts of capacities with IWP. You could ask the same question of local organizations involved with LGBT rights and food justice, which also benefit from our collaboration with them . The fact that you aren’t actually very schmott and don’t understand the social justice work UU (and UCC) churches do doesn’t mean it doesn’t exist.
In any case, regardless of any of that, there is no reason for any voluntary nonprofit organization to be treated differently from any other, in either positive or negative ways. Churches of any kind should have exactly the same tax status as American Atheists, or your local community theater.
Steve LaBonne
And what about those churches that don’t? Or that do charity work to recruit? Or those that discriminate while doing charity work? Are you really doing enough charity work to justify being completely tax exempt when that’s not all that you do?
I’ve been in and out of shelters and dependant on charities for most of my life. Yes, there a lot of churches but that doesn’t mean shit. Their protected status gives them so much power to abuse and abuse it they do. Taxing churches would provide so much more help through secular government. And really, if you do enough charity work become a fucking charity.
Steve LaBonne
So you really think is okay to give tax exempt status to churches that are for profit? As if they do good by just existing. Go fuck yourself.
@ 17 and 18, if you can substantiate that a given church is actually a profit-making business- turn them in- they’re violating the law. Otherwise, it is sure as hell not the business of you, me, or most of all the government to discriminate among nonprofit organizations based on whether we happen to like what they do (provided they stay out of partisan politics). I don’t think any chink in that wall would go well for American Atheists or FFRF in this political climate. I will also repeat that I am adamantly against special privileges for churches that other nonprofits don’t enjoy.
Steve LaBonne @ 19:
I’m not aware of any law in the USA that requires a church be non-profit, or that a church must register for non-profit status. I’m also not under the impression that such a requirement would be constitutional.
OT:
When did FTB start tacking crap like
onto the end when you copy something?
I misspoke on that point, then- thanks for the correction.
No problem. It didn’t seem like it was intentional.
Steve LaBonne
Except the fact that churches receive tax exemption automatically considered a non-profit without being a non-profit destroys everything you said in the thread, not just that one sentence. Are you going to walk all of that back? Or actually respond to what I said then? Or are you sticking with:
Because I have big fucking problem with that. Churches are not synonymous with charity or non-profit organizations. They’re fucking clubs who receive donations from members and invest their money to make more of it. Just like McDonald’s their donations to causes do not negate what they are or how their run.
As in, all of them since they don’t have to register as a non-profit or have the oversight by submitting forms (thus making taking away their exempt status almost impossible). Actually BEING a non-profit organization or charity is completely different from being a church.
#24 / JAL:
If I’ve found the right cite, the legal definition of a nonprofit is:
“Nonprofit, as applied to an agency, organization, or institution, means that it is owned and operated by one or more corporations or associations whose net earnings do not benefit, and cannot lawfully benefit, any private shareholder or entity.”
(source: http://www.law.cornell.edu/cfr/text/34/77.1)
Proving non-profit status seems to be mostly a matter of getting a statement from either the IRS or a state government that the organization actually is a non-profit (source: http://www.law.cornell.edu/cfr/text/34/75.51).
Doesn’t seem to conflict with investing donations to make more money (which is exactly what Harvard’s endowment does, as well); the difference between that and MacDonald’s is that Mickey D’s has shareholders who benefit from the profits / investments / etc.
I think you’re conflating non-profit and 501(3)(c) charities to some extent, JAL. To make more of a distinction: I think it should be just as easy for a church to get non-profit status as any other club, but it should be as difficult to get 501(3)(c) status as it is for any other organization.
But all I could think on reading this proposal is…why are you going after universities, which are promoting education and research, and not going after the massive tax-free boondoggle of the churches, which promote superstition and, lately it seems, priestly buggery? If you’re going to claim a high-minded dedication to seeing huge endowments used wisely, I’d like to see some judicious prioritizing of targets on your part first.
Why do you single out churches? They can take the non-profit status of Harvard only after they have taken the non-profit status of the National Football League. First things first.