RegulationMarch 13, 2024

Proposed Massachusetts Endowment Tax to Hit Harvard, MIT, 11 Other Schools

The 2.5% excise tax would target private institutions in the state with endowments of at least $1 billion.

Reported by Michael Katz

Massachusetts legislators are considering a bill that would impose a 2.5% annual excise tax on private institutions of higher learning in the state with endowments larger than $1 billion. The tax is intended to subsidize the cost of higher education, early education and child care for lower-income and middle-class state residents.

The bill, An Act to Support Educational Opportunity for All, would affect approximately 13 endowments in the state, including Harvard, the Massachusetts Institute for Technology, Boston College, Williams College, Tufts University and Amherst College, all of which are private and have endowments in excess of $1 billion.

Harvard alone, which has an endowment worth an estimated $50.7 billion, would have to pay the state nearly $1.3 billion per year if the bill passes.

According to the text of the bill, all funds collected from the tax would be deposited in the Educational Opportunity for All Trust Fund. The fund would be administered by the executive office of education, as directed by the board of trustees of the Educational Opportunity for All Trust Fund in consultation with the department of higher education and the state’s department of early education and care.

“The fund shall be used exclusively for the purposes of subsidizing the cost of higher education, early education and childcare for lower-income and middle-class residents of the commonwealth,” the text of the bill states.

The board of trustees would consist of seven members, including the commissioner of the state’s department of higher education or a designee, the commissioner of the department of early education and care or a designee and five other trustees. Among those five, two would be appointed by the president of the Massachusetts Senate: one a higher education expert, one an expert representing the child care workforce in a labor organization.

Another two would be appointed by the speaker of the Massachusetts House of Representatives: an early education and child care expert and an employee of a Massachusetts community college. The remaining trustee would be an employee of one of the schools subject to the tax and would be appointed by the state’s secretary of education. The trustees would serve two-year terms and be eligible for reappointment.

Liz Clark, vice president of research and policy analysis for the National Association of College and University Business Officers, said in an emailed statement that while the organization’s advocacy efforts are focused on the national level, “we are opposed to excise taxes on higher education institutions that steer funds away from the nonprofit, educational purposes of colleges and universities. These taxes ultimately mean fewer dollars institutions have to spend on their students, faculty, and missions.”