Taxing the Harvard Endowment

John Hechinger reports that lawmakers in Massachussetts are considering a 2.5% tax on the portion of college endowments that exceed $1 billion. Such a tax would raise $1.4 billion a year, with 60% of it coming from Harvard.

Greg Mankiw grumbles that Harvard could or should simply move somewhere else if that happened; you can file that idea under "extremely improbable". Right-wingers always say that if you tax people or institutions with money they won't pay more tax, they'll just move; they're rarely proved right.

But Harvard's official response is even sillier:

Kevin Casey, a spokesman for Harvard, said the proposal would hurt Massachusetts and colleges because it would damage "stable bedrock institutions" that have helped shield the region from the worst of the economic slowdown.

The Harvard endowment has helped shield the Boston area from the worst of the economic slowdown? How's that, exactly?

My feeling is that it's becomes increasingly difficult to make the case that multi-billion-dollar endowments should continue to reap all the benefits of being untaxed. Sure, education is a Good Thing. But with the Harvard endowment growing many times faster than the rate at which it's spending money, only a tiny percentage each year goes to anything which could reasonably be considered a worthy cause.

All the same, I'm not a huge fan of this proposal; I'd rather see something which falls to zero once the endowment spends 5% of its capital each year - the minimum requirement for private foundations. That would give Harvard an incentive to inject some more money into the region and thereby help shield it from the worst of the economic slowdown.