I’m sure there’s plenty of unintended consequences that could arise (and I’m sure other commenters will point those out), but as a Harvard alum I am frankly in favor of this in principle. Though I’d also like to see other tax streams set up to support higher education, rather than making it a zero-sum game.
It's fair for them to announce here as otherwise "I for one am cool with taxing [my] institution" is interpreted as "I for one am cool with taxing [that]"
Thanks, sports team fandom is a good example of institutional loyalty.
In this particular case, the analogy is also a little funny, since it could be used or interpreted as a put-down.
Consider "town vs. gown" dynamics, and some movie caricature of Harvard blue blood person, implying that a local (Boston) townie would need a Red Sox analogy, to understand loyalty to the college a person attended.
Harvard and MIT are nonprofits so normally don't pay taxes (meaning property taxes, income taxes, etc -- they do pay payroll taxes and sales taxes). Between them and all the churches, quite a large percentage of Cambridge's property, especially commercially-zoned property, pays no tax at all. But for some reason, those two institutions just happen to make large donations to the city and state every year.
Personally I'm neutral on taxing the endowment. I can't get around the paywall (archive.ph seems to be having trouble with bloomberg links today) so I don't know if this is an asset tax or a tax on realized gains. Given how the institutions use their endowments (they just hoard them to game the US News ratings, which is pointless for Harvard and MIT) it's probably good.
It's the other way around. It's the non-profit part of the donations to non-profits that relieves the non-profit from paying taxes on the revenue, not the fact that it's a donation.
If you somehow made a voluntary donation to, say, your local bar, the bar would still be taxed on that revenue (assuming it's not somehow a registered non-profit bar).
>But for some reason, those two institutions just happen to make large donations to the city and state every year.
Because that's part of the deal those institutions basically cut with at least the city (don't know about the state) decades ago. It's pretty reasonable. They don't have to pay taxes and are arguably good for the city as a whole but, of course, they're dependent on a lot of city services. When you're as wealthy as they are, it's just sensible not to see how far you can push things in the direction of paying the least possible amount.
Honestly the disney arrangement felt like it was to get better services on their properties than what they could ever get the local government to do otherwise. You can tell as soon as you’ve crossed the border into disney country and it goes well beyond just the roads and signage being much nicer.
Not sure about these colleges but honestly colleges offer a lot of services to the local community. They might police a certain area directly. They might maintain certain roads. They could run their own sewer setup or run their own powerplant. They probably maintain a datacenter. They might even run or own a hospital, or even run a small school for observational studies in their education program. To say nothing of the payroll tax added by their usually massive employee headcounts, plus all the tax revenue coming in from income tax of students working nearby and that payroll tax, sales taxes as well.
What else to expect from the state of Elizabeth Warren.
While I agree that university endowments are getting absurd, I also doubt that the government will make better use of them.
What’s $5B to the Massachusetts government? Almost nothing - just 9% of the budget for one year [1].
These schools should leverage what they’re good at and put real resources to increasing access to education. More OCW courses.
Or just do more research.
[1] Massachusetts enacted its FY 2024 budget in August 2023. The budget reported $56 billion in general fund spending, an increase of less than 1 percent over the previously enacted budget. https://www.urban.org/policy-centers/cross-center-initiative....)
You said it was about 9% of the state budget and that was next to nothing.
If 9% is next to nothing then you should have no problems parting with next to nothing of your salary. I know that this would be a one time payment, I'm not asking you to sign up to tithing to me each year.
I'll just get that next to nothing 9% from you the one time and be on my way.
It could be that, or it could be that the reflexive response is not to me made to feel like a chump because I am paying taxes whereas a corporation person with $51 billion is not
What’s a “corporation person”? There’s an implication of unfair consumption that defies you on the basis of taxation. Don’t get me wrong, I am fully versed in the tax system and unfairness around it, but it’s not because corporations can pool capital and earn income without personal taxes. Much more so it is on the side of categories of taxation, with various arbitrary and intricate rules about which real people are permitted to do what on what category of income.
I'm sure Harvard's investment arm is incorporated. That gives it some person hood in US law. It's making income on its investments and not paying income tax.
> What else to expect from the state of Elizabeth Warren.
Elizabeth Warren is a senator and thus represents Massachusetts at the federal level. Also, Massachusetts often has Republican governors. In fact, Charlie Baker was so good, his biggest supporters were the Democrats instead of his own party. Go figure.
2.5% of $51B is about $1.2B. I'm not sure where your $5B number is coming from.
As to where it goes -- state universities, as the article states. The 2023 budget over all the state universities appears to be around $1.27B, with the state government providing about $320M of that.
An additional $1.2B given to the state universities can probably do a lot of good, and raise the service level (and allow for expansion as well).
You seem to have misread where the funds will be directed.
As someone who lives in the Boston area I think specifically the real estate holdings of these massive, non-profits should be held to scrutiny.
Boston is pretty constrained in terms of available land - and its large number of expanding universities means that a good portion of it becomes tax-exempt.
The city tried to implement a voluntary payment program to invoke the non-profits’ good will - but you can see for yourself that they rarely get what they asked for - Harvard only paid 80%:
Harvard now owns 1/3 of the Allston neighborhood in Brighton - which for decades had some of the cheapest housing in Boston. If it’s gentrifying, at least let the city capture some revenue.
The VAST majority of it comes from personal income tax, sales tax and corporate excise tax. Don't think Harvards $53B endowment is even relevant compared to that budget.
Let’s sidestep the legitimate uses of the money for now.
These institutions in Boston are centuries old. Boston has a very finite amount of land.
Allowing organizations with a lifespan in centuries the ability to buy and hold land without limit at no cost seems like a bad long term economic policy. What is the limiting factor on their growth?
If the goal is to use the land better, making the very very rich pay a tax for using it badly is not a great idea. They will pay the tax, and use the land, and the city will have exactly the same problem as before, but with some more money that disappears into the “general fund.”
> It means that the city can get money from them completely for free with no downside.
Let's apply this argument to the use of a head tax. Everybody pays the same amount unconditionally with no way to avoid it, so it's free money with no downside?
> Let's apply this argument to the use of a head tax. Everybody pays the same amount unconditionally with no way to avoid it, so it's free money with no downside?
No there is a downside to that.
The downside is one of redistributionary effect of having a flat tax. IE it negatively effects poor people more.
Thats a separate and unrelated downside to the other example.
This example isn't that though. The hypothetical that the other person gave, was that we could engage in taxing wealthy people and it would have zero deadweight loss (as in, those wealthy people apparently keep using the land exactly the same amount as they were before).
This would indeed be a free win, in economics.
Usually, the problem in economics of taxing wealthy people is that it puts a disincentive on productive work. This is called deadweight loss.
But in this other crazy hypothetical, we can get tax dollars infinitely for free from only wealthy people! Amazing!
> The downside is one of redistributionary effect of having a flat tax. IE it negatively effects poor people more.
To affect poor people more it would have to be affecting people. I thought it was free money because it doesn't put a disincentive on productive work?
> The hypothetical that the other person gave, was that we could engage in taxing wealthy people and it would have zero deadweight loss (as in, those wealthy people apparently keep using the land exactly the same amount as they were before).
They might keep using the land in the same way, but that doesn't tell you anything about how they were using the money.
They could intend to donate it to a charity or use it for some economically productive activity and the government may or may not be able to put it to a more productive use. US legislators' track record on monetary efficiency is rather humiliating.
> I thought it was free money because it doesn't put a disincentive on productive work
There are 2 major and unrelated effects to taxes that are discussed in any basic economics 101 theory that I am happen to explain to you.
Sorry, I take a lot of basic econ theory for granted, even though I am sure most people haven't taken an introductory economics class. Thus leading to confusion.
effect 1: Changes to behavior/Disincentives on work. IE deadweight loss.
effect 2: the redistributionary effects of the taxes. IE does it harm poor people or not.
These are unrelated effects and are separate effects/downsides/benefits.
Do you understand how there can be 2 effects to a thing that happens, effect 1 which is bad, and that there can be a different effect 2 which is also bad in a different way?
You saying "Well what about this policy B that doesn't have downside number 1?!? Are you saying that there is nothing bad to policy B?!? Because you said that policy A was fine because it doesn't have downside 1? Therefore it must be that policy B is good because it also doesn't have downside 1."
The completely obvious counter response to this bad point is that policy B, which is different than policy A, has an additional downside which is downside number 2.
And policy A is good because it has neither downside 1 or downside 2.
Does that explain the misunderstanding that is apparent from your comment?
The fact that you brought up a head tax also betrays the point. Because you know that a head tax is bad, otherwise you wouldn't have used it as an example.
You know that it isn't the same. Although it still confuses me that you would bring it up, because you didn't jump to step 2 which is to explain the difference between the 2 policies.
And the next question, that actually matters, is the clear different between a head tax and a land tax. Which is explainable via basic economic theory.
> effect 2: the redistributionary effects of the taxes. IE does it harm poor people or not.
The error you're making is in limiting this cost to redistribution between income levels.
Taxes don't redistribute money from the rich to the poor or vice versa. They redistribute money from the public to the government. The government might then use the money to benefit the poor -- or they might not. They could just set the money on fire without changing how much they collect in taxes or from who. They could collect 90% of taxes from the rich and 10% from the poor and then give 100% of the money to the rich.
The reason taxing the poor is worse than taxing the rich is that it causes more harm. The money means more to the poor because it affects whether they starve or can afford rent instead of whether they can invest in some new business venture. That's why I used that example -- it makes the cost much more clear, because you immediately realize that by doing it you're going to cause someone to go without.
But that doesn't mean the cost of taxing the rich is zero. New business ventures have value too -- sometimes quite significant value. So you still don't want to just tax them for no reason, or raise their taxes by an arbitrary amount regardless of whether the government's use for the money is less productive than their own.
> The error you're making is in limiting this cost to redistribution between income levels.
You are ignoring the fact that we have taxes already.
Even if you think that there is other redistributionary harm to taxes, if we found some magic tax that didn't have any dead weight loss, and also only effects rich people, then we could at a minimum replace all existing taxes with that magic new better tax.
(Perhaps total taxes could even be reduced! Because there is now extra room and value created because of the zero dead weight loss!)
Therefore the point stands that if this is the case, then it would still be a massive win to find such a magic tax.
The institutions have been a considerable growth factor for the city. Seems kind of rude to stop them from parking their money in real estate like everyone else has been doing.
> Allowing organizations with a lifespan in centuries the ability to buy and hold land without limit at no cost seems like a bad long term economic policy.
Why? If you believe land should be owned at all, an institution with a lifespan in centuries seems more likely to use the land responsibly than one with shorter-term planning. (At the least they should be less likely to e.g. dump a bunch of toxic waste for others to clean up; better, they actually have an incentive to develop it in positive ways)
All that land still gets hooked up to the power grid, local roads, the staff’s children need local schools, etc. and property tax is used to pay for upkeep and services. It is not as if Harvard is running its own sewage treatment and maintains the public roads through campus.
I was trying to head off a nitpicking discussion over what is and is not a good use of tax payer money.
The big idea is that cities do need some money.
Locking away large portions of the city’s revenue generating assets (the land) indefinitely is going to reduce options for future city governments.
We don’t know what the funding challenges of the future will be. I hope they are small - with minimal tax increases. But I think cities should have some ability to safeguard their future revenue generation.
A government should be the servant of its people, not their master; you're talking like the city naturally owns the land and other entities should have access to it on sufferance, which is backwards - especially in the case of Harvard which is likely older than the city government (and certainly older than city provision of electricity, roads, and schooling as GP was talking about). Blocking people from owning land today in case the city runs out of money in the future is putting the cart thoroughly before the horse.
It is good economic policy. There isn't much of an argument that tax is helpful to the economy. The argument is that despite the damage tax does to the economy, we should tolerate it anyway for moral or logistical reasons. The list of countries that taxed their way to prosperity is ... I've never seen the list.
There is an argument to fairness. Everyone should be subject to the same tax rules. Even deserving causes like educating elite children.
Harvard also has owned 1/6 of Allston since the 1920’s. People act like additional 1/6 they bought 1990-2016 made huge changes to neighborhood housing prices, but Allston was gentrifying regardless. CSX was moving out, which inevitably was going to lead to Houghton shutting down their rail yard. New Balance was growing right on Allston’s doorstep. That’s what brought Boston Landing and 10-15 minute rides downtown, not Harvard.
But overall, the biggest driver of gentrification was the campaign by Eva Webster to treat half of Brighton like it is the Back Bay. You can’t replace your windows, much less build new housing, due to https://www.boston.gov/historic-district/aberdeen-architectu... . That’s what caps the growth of housing and drives prices up.
The housing people want is more housing but the city won’t let them build it because of its exclusionary zoning practices. Go lmao about that. There’s plenty of space to go vertical.
Yes, I was hoping that if they started a land value tax, it would be applied to non-profits as well.
There's also an argument for LVT applying to government land, just so that the public and decision makers are acutely aware of the rents being extracted from the public, if it's a parking lot or something like that.
> There's also an argument for LVT applying to government land, just so that the public and decision makers are acutely aware of the rents being extracted from the public, if it's a parking lot or something like that.
How is that supposed to work, you tax the government and give the money to the public? It's not really going to affect their behavior if they're just paying a tax to themselves.
It's an accounting measure, to help people evaluate the use of land and whether it makes sense or not.
For example, if a public surface parking lot in a downtown area is owned by a city, and brings in $1M in revenue, but is taxed at $3M for its land values it's very clear what the subisidt is and who the beneficiaries are. And perhaps that might motivate the city to make better use of the lot, decide that there would be more public value as a park, or to build offices or housing on it.
The ability for land value tax to even generate estimates like that still seems counterintuitive to me.
Suppose you pass a law prohibiting anyone from constructing buildings with more than two stories. Well then you've just made the land artificially scarce because you need more of it to build the same amount of indoor space. Land value tax is useless in that situation because then all the land will end up with a two story building on it, they'll all be valued about the same (or someone would buy the cheapest one for the land and build a more expensive one), and you've effectively just reinvented property tax. And aren't really achieving the benefits a land value tax is supposed to bring, e.g. reduce housing scarcity by increasing the incentive to build housing, because it can't do that when building more housing is still separately prohibited by law.
Now suppose you don't do that. Anybody can build a ten or twenty story building anywhere, and there would be enough indoor space to satisfy local demand if every lot had a three story building on it. Since there is no additional tax on a tall building, people start putting them up until local rents fall to no longer cover the construction cost. Okay, working as intended. But that happens well before all the lots have a 10+ story building on them, so there are still plenty of lots available.
The question is, what happens to the other lots? Their value would be negative. You can't profitably put up a building there now that local rents are too low to cover the construction cost, but you'd still be paying the land value tax. Unless that's the endgame. Negligible land value, and therefore negligible land value tax?
Solid idea. Have you considered the additional carrying cost of treating two tracts of land thr same despite having massively different structures on top?
For example, higher capacity for roads congestion, sewage, electricity connection etc.
At some point it almost seems like the tall building is freeriding on taxpayers.
I would think that the vacant lots are the ones freeloading, keeping people from living in, working in, or otherwise being able to access an extremely high value area.
The expenses of running roads and sewer are completely dwarfed by the gain in economic activity. Dense, high land value areas are the tax bases that subsidize the far less utilized and more-expensive-per-connection sprawl.
> For example, higher capacity for roads congestion, sewage, electricity connection etc.
But what does this have to do with property tax? Roads can be funded by fuel taxes or car taxes, if not income taxes. Sewage and electrical systems are billed monthly to their users. Presumably a larger building will have a higher electric bill and if it doesn't it will be from devising a way of not using more electricity.
Yes, a well functioning land value tax will drive down land values and make land far more liquid, maximizing the best possible use of a finite resource. There's the carrot of cheap purchase price of land, and the stick of high taxes if the land is being hoarded and underutilized.
When there are extreme restrictions on what you can build, such as a maximum of two stories, then that "ability to build" has itself been turned into a finite resource; at that point both the structures and the land are economic land: finite resources that are not easily expanded. This is in contrast to capital, for which a person could theoretically build more of that asset.
> When there are extreme restrictions on what you can build, such as a maximum of two stories, then that "ability to build" has itself been turned into a finite resource; at that point both the structures and the land are economic land: finite resources that are not easily expanded. This is in contrast to capital, for which a person could theoretically build more of that asset.
This kind of comes back to the issue with valuing the land when the government is using it. Suppose they pass a law zoning that piece of land for use as a parking lot. The land value is then only going to reflect its value for use as a parking lot, since the law prohibits it from being used for anything else. Not taking into account zoning would produce a wildly inaccurate assessment of the practical value of the land, but taking it into account means that you're not taking into account the cost of the zoning restriction.
And the accounting for that is pretty weird. If you change to relaxed zoning on only a small section of land, the value of that land will be quite high because it's the only place you can build tall buildings. The reduction in regional scarcity from having a tiny number of tall buildings isn't going to outweigh the ability to build 10+ times more housing on those lots in particular. Whereas if you relax zoning over a sufficiently large area then it's the opposite. The increase in permissible density makes land in general less scarce, even in places that allow that higher density, because they're now common.
> There's the carrot of cheap purchase price of land, and the stick of high taxes if the land is being hoarded and underutilized.
The thing that worries me is that these are the opposite for the government. Creating artificial scarcity increases their tax revenue and also ingratiates them with local land owners unless the government is capturing all of the value of artificially scarce land. Which is supposed to be the theory with land value tax, but all they have to do is be off by as little as 10% and you're back to landlords lobbying the government for zoning restrictions.
And even if they get that right, when the government wants to spend money on things and they only get money when land is artificially scarce, what are they going to do?
Combined with the cash-strapped bean-counting tendencies of local governments this sounds like a recipe for suburbanizing services into cheaper land, at great cost to municipal inhabitants.
As a general example, there are one million public schoolchildren in New York City, many who attend schools in some of the hottest real estate in the country. Requiring cities to put that on their balance sheet would mean that governments are highly incentivized to make children commute an hour into cheaper suburbs to get schooling.
> Requiring cities to put that on their balance sheet would mean that governments are highly incentivized to make children commute an hour into cheaper suburbs to get schooling.
Or move the school into a floor of a multi-story building which would significantly reduce its proportion of land value tax and in so doing consume less of that hot real estate and contribute less to housing scarcity.
Instead of adding complexity, why not remove complexity?
Instead of creating new tax rules, why not remove 501c nonprofit status from all univesities or maybe from those with significant endownment or balance sheet?
Thats where the value really is. The land is just a subset of the overall assets.
Or if you want to be ambitious, just get rid of 501c for universities, period?
Boston metro has more than enough land. The densest cities -Somerville and Boston proper - have 1/3 the population density of Paris. The problem is local zoning prohibits building denser housing and commercial real estate, and thus artificially limits Boston metro’s tax base. Harvard is not causing gentrification in Allston. Mayor Wu’s restrictive zoning is.
Eh, why comparing it to Paris? How about comparing it to other US cities, because that's what people care about? I don't think anyone saying that sentence think about the situation in other parts of the world.
Because Boston doesn't and hasnt functioned like an American city.
It's contemporaries are other not-very-american cities in NYC, Philly and DC proper. DC and Philly are cheap, NYC is dense. Boston has space and is expensive. It's an exception. Bostons tiny roads make driving impossible. It has actually history and protection worthy neighborhoods, so it a few towers do well to compensate for buildings that cannot be brought down. It has the infrastructure for amazing public transit (pre covid) and can easily support the extra density.
All of Boston's peer cities are European-esque cities in the US or European cities.
There is a good reason for that. What America calls European cities, are just called 'cities' elsewhere. Other than US, Canada and Australia....no other place has this wierd American model of car dependent asphalt sprawls.
(1) Massachusetts taxed nonprofit university endowments. (This would not directly improve services -- instead MA would cut personal income tax for the wealthy then reduce state funding for services like the legislature and governor did in 2023)
(2) In retaliation, universities built huge quantities of housing throughout the state, using their Dover Amendment exemption to avoid all zoning requirements. They would have to simulate an eligible use.
This would probably improve quality of life for communities - rents and home prices would go down due to the glut of new housing units.
Any church that engages in for-profit activities is already taxed. The only "special" treatment churches get is they're assumed by default to be non-profits while other non-profits have to apply for the status.
Furthering religious beliefs is a bonafide charitable act here in NZ, not just the assumption of non profit status. They don’t to feed the hungry, clothe the poor or do anything beyond converting other people to their religion in order to pay 0 taxes.
They also don't have file a form 990 or provide any information about their operations, and there is no requirement that they benefit their community or society in any way. Both of those are unique to churches.
Which seems weird, if I'm not misunderstanding this.
So if you make profit and donate it to a charity, you can deduct it and they don't pay tax on it either. But if the charity makes a profit, effectively donating the money to itself, it does? What?
An LDS whistleblower disagrees: the LDS church created an elaborate complex of shell companies to disguise for profit investments for roughly two documented decades. The SEC penalized them a tiny fraction of what the whistleblower documented.
Most churches (with the obvious exception of megachurches amongst others) do more good than harm. I feel like they are good for local communities because its one of the few places that people interact face to face, and the downsides of religion "brainwashing" probably happens more on the internet than irl.
> As a child, this was how I always felt when the Catholic Collection Plate would circulate among the congregation.
Profit in this context means filthy lucre that the business owners have every right to spend on strippers and cigarettes and private islands. Churches are more restricted in what they can do with it and moreover tend to lose their patronage if that's what they're spending the money on, as opposed to private businesses whose patrons give money in exchange for books or food and don't really care if the owners are using the profits to play blackjack in Vegas.
> I also think that all hospitals should pay taxes — until there is some sort of single-payer universal healthcare institution.
What does that have to do with anything? Business operating expenses are generally deductible and their "income taxes" are effectively taxes on profit. A non-profit doesn't have any owners to receive profits, so they either operate with with a neutral budget or put any net income into an endowment that allows them to survive if future years are leaner or provide more services or charge lower prices.
Taxing them would only cause them to have lower quality or higher prices or go bankrupt more often.
Here in the land of the free and the home of the brave, freedom of religion is a Constitutionally guaranteed human right. That is to say, the government shall not make special accomodations or exceptions for any religion.
That means churches getting to avoid taxes, unlike other not-non-profit organizations, has always been one of those things that should be resolved but hasn't because the people like breaking that law.
It's the same reasoning why "under God" should be removed from the national oath and Ilhan Omar should not be allowed to wear a hijab in Congress: Special accomodations and exceptions for religion are plainly unconstitutional.
I was with you until the hijab bit. Why do you think that wearing a hijab is a special religious accommodation? And why would it not be protected as a freedom of expression regardless?
Because nobody is allowed to wear hats and other head coverings in Congress.
They made a special exception specifically for her on religious grounds, which is a violation of the government's Constitutional requirement to treat all religions equally as a part of guaranteeing freedom of religion.
If Congress had instead changed the rules so everyone can wear hats and head coverings that would have been fine, but that's not what they did.
You seem confused. The exception was not for her. It was generic exception for wearing it for religious reasons, this includes Islamic hijab as well as the Jewish kippah and Sikh dastar (potential others) [1]
> Here in the land of the free and the home of the brave, freedom of religion is a Constitutionally guaranteed human right. That is to say, the government shall not make special accomodations or exceptions for any religion.
> That means churches getting to avoid taxes, unlike other not-non-profit organizations, has always been one of those things that should be resolved but hasn't because the people like breaking that law.
I personally live in the mid-sized Southern city with the distinction of "highest churches per capita >100k population" — state law only requires three founding church members, and all church property is tax-free. To speculate that "it should all be tax free" is absolute insanity, particularly property taxes.
Its not brainwashing. Preachers or leaders dont hold authority there. The stuff that gets said is simply local views that just get perpetuated in communities that have already been brainwashed by the internet.
There’s a pretty easy way to verify that churches are doing more good than harm: let them declare their good deeds on a tax form. Then all the landholding mega churches can put their money where their mouth is
My local US county is about to have a major shit-show when the local property tax assessor gets replaced with somebody half his age [1], and finally appraises his Silent Generation friends' properties at fair market value.
Now if we could just get them all to agree that funding a new minor league baseball stadium is ridiculous! Particularly with all the county funding in addition to tax rebates. <They already have a stadium that is suitable>
[1] Last local election cycle, of our 5 electable candidates THREE were decades younger than incumbent/predecesor.
These things have a target on them for pretending to be inclusive at all
But the only reason for that is because the common person & industry decided that university degrees are necessary for workplace eligibility. This is a half century aberration that will go away as quickly as it came about, and these 400 year olds institutions will continue being their isolated elite trading cards for a whole millenium
> We should be lowering government spending and lowering taxes, not trying to spend more.
After seeing the inefficiency and incompetence of government bureaucracies for so many years, I’ve really come around to this idea. I don’t think we should have a libertarian free-for-all, because that carries its own problems. But I do think a great deal more policy could be effectuated through market-based mechanisms and private rights of action instead of clueless and corrupt functionaries.
> Even though these institutions are facing internal problems, they're still better run and will probably out last whatever government is around them.
No, you just hear more about the problems with government because they have much better accountability measures. Which is exactly why it's better for money to be taxed, and services run by governments, than these things handed over to the opaque and unaccountable NGO complex.
On the one hand money in an endowment has presumably already been taxed at least once. Taxing it again is double taxation and that’s bad because once you allow money to be taxed twice, you have to be ok with it being taxed many times over — O(1) to O(n) if you will. The moral position of government would be that taxing the outcome of growth and wealth creation is fine, but retaxing existing money is the government breaking its covenant with the people.
On the other hand I would accept the government’s position if it were to say aloud that there goal is for all large pools of money to be reclaimed by society. Double taxing wealth is then ok because it will, eventually, redistribute the wealth. In such a moral code, a $51bn pile of gold is quite an aberration.
It is classic right versus left: natural hierarchy versus we’re all the same.
Lots of money in the endowment is investment earnings. Have those been taxed? I didn't check, but it seems like that information is important to your argument.
Thanks, that’s an important detail. I guess it boils down to how much private wealth is too much, and what if anything should we do about it?
An argument on Harvard’s side is that, in the grander scheme of things, they are part of a process that generates phenomenal tax revenue. The state takes their 40% cut off the top of every $150k CS and IB graduate salary after all. Is that a good enough benefit to let us tolerate Harvard’s pile of gold?
There is a related argument that if society is to be the ultimate recipient of the majority of benefits of a university system, then it should probably be state funded. Just like roads (public) trains (ish) electricity (not any more) and food (private but subsidised).
I never buy this tax multiple times argument. My wages (money from labor) are taxed multiple times. But when it comes to money from capital, i start hearing this argument about double taxation being bad. What???
I don't understand why these institutions are treated as "educational" rather than "investment funds" when they evidently act like the latter. I understand the legal protections, but why have politicians sat on their hands for the last thirty years while our education went to shit?
Such hypocrisy. Wealthy Cambridge MA - where Harvard and MIT are located - with all its $2M+ single family homes, has the lowest property taxes in the state. If we want to better fund state colleges, levy a state property tax on the well-off property owners. Warren herself lives a few blocks from Harvard in a multi-million single family home and could stand to pay a few more bucks percentage wise like us poorer people do.
To be fair, for the Avon Hill area her place is pretty pedestrian, and like many in that neighborhood they've been sitting on their property for years -- the tax windfall for the state won't come until those property owners sell en masse, which is unlikely, it's one of the nicest areas in Cambridge.
It's about time the State started taxing the Church's land. Seriously, imagine if that money were invested in creating value instead of hoarding inelastic goods. We would all get to see just that much more prosperity.
The comments are mostly missing the point. The budget of harvard is almost 5 billion a year (this is a couple years old, I wouldn't be surprised if it was higher now) and it has a 50 billion dollar endowment with 25,266 undergraduate and graduate students. This is almost 200k/student/year in cost and 2 million/ student in endowment. If you compare to a school that also has a lot of fat but is still a top 100 university in the world that is subject to a different regulatory regime the University of Toronto, that has ~27k per student cost to run and roughly 27k per student in endowment. One can only conclude that Harvard is not a university at all, it's some weird new thing that is pretending to be a university for tax reasons and that tax protection should be annulled until the endowment is shrunk back down to something more reasonable like a year or less of operating expenses benchmarked against a real university like the University of Toronto.
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[ 36.6 ms ] story [ 409 ms ] threadIt’s more like someone whose allegiance to a team is unknown, saying he’s okay with NYC charging sales tax at Yankees games.
In this particular case, the analogy is also a little funny, since it could be used or interpreted as a put-down.
Consider "town vs. gown" dynamics, and some movie caricature of Harvard blue blood person, implying that a local (Boston) townie would need a Red Sox analogy, to understand loyalty to the college a person attended.
Personally I'm neutral on taxing the endowment. I can't get around the paywall (archive.ph seems to be having trouble with bloomberg links today) so I don't know if this is an asset tax or a tax on realized gains. Given how the institutions use their endowments (they just hoard them to game the US News ratings, which is pointless for Harvard and MIT) it's probably good.
If you somehow made a voluntary donation to, say, your local bar, the bar would still be taxed on that revenue (assuming it's not somehow a registered non-profit bar).
Because that's part of the deal those institutions basically cut with at least the city (don't know about the state) decades ago. It's pretty reasonable. They don't have to pay taxes and are arguably good for the city as a whole but, of course, they're dependent on a lot of city services. When you're as wealthy as they are, it's just sensible not to see how far you can push things in the direction of paying the least possible amount.
While I agree that university endowments are getting absurd, I also doubt that the government will make better use of them.
What’s $5B to the Massachusetts government? Almost nothing - just 9% of the budget for one year [1].
These schools should leverage what they’re good at and put real resources to increasing access to education. More OCW courses.
Or just do more research.
[1] Massachusetts enacted its FY 2024 budget in August 2023. The budget reported $56 billion in general fund spending, an increase of less than 1 percent over the previously enacted budget. https://www.urban.org/policy-centers/cross-center-initiative....)
If you want to talk the actual bill, it seems to be for a 2.5% tax on investment returns, so actually pretty small.
If 9% is next to nothing then you should have no problems parting with next to nothing of your salary. I know that this would be a one time payment, I'm not asking you to sign up to tithing to me each year.
I'll just get that next to nothing 9% from you the one time and be on my way.
Elizabeth Warren is a senator and thus represents Massachusetts at the federal level. Also, Massachusetts often has Republican governors. In fact, Charlie Baker was so good, his biggest supporters were the Democrats instead of his own party. Go figure.
2.5% of $51B is about $1.2B. I'm not sure where your $5B number is coming from.
As to where it goes -- state universities, as the article states. The 2023 budget over all the state universities appears to be around $1.27B, with the state government providing about $320M of that.
An additional $1.2B given to the state universities can probably do a lot of good, and raise the service level (and allow for expansion as well).
You seem to have misread where the funds will be directed.
https://budget.digital.mass.gov/govbudget/fy23/appropriation...
* Government doesn't really use the money, they are going to state universities and community colleges, if you bother to actually read the article.
Boston is pretty constrained in terms of available land - and its large number of expanding universities means that a good portion of it becomes tax-exempt.
The city tried to implement a voluntary payment program to invoke the non-profits’ good will - but you can see for yourself that they rarely get what they asked for - Harvard only paid 80%:
https://www.wcvb.com/article/complete-list-of-colleges-hospi...
Harvard now owns 1/3 of the Allston neighborhood in Brighton - which for decades had some of the cheapest housing in Boston. If it’s gentrifying, at least let the city capture some revenue.
They have a $16B annual budget - https://budget.digital.mass.gov/govbudget/fy23/tax-expenditu...
The VAST majority of it comes from personal income tax, sales tax and corporate excise tax. Don't think Harvards $53B endowment is even relevant compared to that budget.
These institutions in Boston are centuries old. Boston has a very finite amount of land.
Allowing organizations with a lifespan in centuries the ability to buy and hold land without limit at no cost seems like a bad long term economic policy. What is the limiting factor on their growth?
Wait, that's amazing then.
It means that the city can get money from them completely for free with no downside.
They can just keep increasing it, they will keep paying, and all fitt budget issues will be solved forever!
Until, of course, it’s pocketed just like most tax money.
Let's apply this argument to the use of a head tax. Everybody pays the same amount unconditionally with no way to avoid it, so it's free money with no downside?
No there is a downside to that.
The downside is one of redistributionary effect of having a flat tax. IE it negatively effects poor people more.
Thats a separate and unrelated downside to the other example.
This example isn't that though. The hypothetical that the other person gave, was that we could engage in taxing wealthy people and it would have zero deadweight loss (as in, those wealthy people apparently keep using the land exactly the same amount as they were before).
This would indeed be a free win, in economics.
Usually, the problem in economics of taxing wealthy people is that it puts a disincentive on productive work. This is called deadweight loss.
But in this other crazy hypothetical, we can get tax dollars infinitely for free from only wealthy people! Amazing!
To affect poor people more it would have to be affecting people. I thought it was free money because it doesn't put a disincentive on productive work?
> The hypothetical that the other person gave, was that we could engage in taxing wealthy people and it would have zero deadweight loss (as in, those wealthy people apparently keep using the land exactly the same amount as they were before).
They might keep using the land in the same way, but that doesn't tell you anything about how they were using the money.
They could intend to donate it to a charity or use it for some economically productive activity and the government may or may not be able to put it to a more productive use. US legislators' track record on monetary efficiency is rather humiliating.
There are 2 major and unrelated effects to taxes that are discussed in any basic economics 101 theory that I am happen to explain to you.
Sorry, I take a lot of basic econ theory for granted, even though I am sure most people haven't taken an introductory economics class. Thus leading to confusion.
effect 1: Changes to behavior/Disincentives on work. IE deadweight loss.
effect 2: the redistributionary effects of the taxes. IE does it harm poor people or not.
These are unrelated effects and are separate effects/downsides/benefits.
Do you understand how there can be 2 effects to a thing that happens, effect 1 which is bad, and that there can be a different effect 2 which is also bad in a different way?
You saying "Well what about this policy B that doesn't have downside number 1?!? Are you saying that there is nothing bad to policy B?!? Because you said that policy A was fine because it doesn't have downside 1? Therefore it must be that policy B is good because it also doesn't have downside 1."
The completely obvious counter response to this bad point is that policy B, which is different than policy A, has an additional downside which is downside number 2.
And policy A is good because it has neither downside 1 or downside 2.
Does that explain the misunderstanding that is apparent from your comment?
The fact that you brought up a head tax also betrays the point. Because you know that a head tax is bad, otherwise you wouldn't have used it as an example.
You know that it isn't the same. Although it still confuses me that you would bring it up, because you didn't jump to step 2 which is to explain the difference between the 2 policies.
And the next question, that actually matters, is the clear different between a head tax and a land tax. Which is explainable via basic economic theory.
The error you're making is in limiting this cost to redistribution between income levels.
Taxes don't redistribute money from the rich to the poor or vice versa. They redistribute money from the public to the government. The government might then use the money to benefit the poor -- or they might not. They could just set the money on fire without changing how much they collect in taxes or from who. They could collect 90% of taxes from the rich and 10% from the poor and then give 100% of the money to the rich.
The reason taxing the poor is worse than taxing the rich is that it causes more harm. The money means more to the poor because it affects whether they starve or can afford rent instead of whether they can invest in some new business venture. That's why I used that example -- it makes the cost much more clear, because you immediately realize that by doing it you're going to cause someone to go without.
But that doesn't mean the cost of taxing the rich is zero. New business ventures have value too -- sometimes quite significant value. So you still don't want to just tax them for no reason, or raise their taxes by an arbitrary amount regardless of whether the government's use for the money is less productive than their own.
You are ignoring the fact that we have taxes already.
Even if you think that there is other redistributionary harm to taxes, if we found some magic tax that didn't have any dead weight loss, and also only effects rich people, then we could at a minimum replace all existing taxes with that magic new better tax.
(Perhaps total taxes could even be reduced! Because there is now extra room and value created because of the zero dead weight loss!)
Therefore the point stands that if this is the case, then it would still be a massive win to find such a magic tax.
Why? If you believe land should be owned at all, an institution with a lifespan in centuries seems more likely to use the land responsibly than one with shorter-term planning. (At the least they should be less likely to e.g. dump a bunch of toxic waste for others to clean up; better, they actually have an incentive to develop it in positive ways)
The big idea is that cities do need some money.
Locking away large portions of the city’s revenue generating assets (the land) indefinitely is going to reduce options for future city governments.
We don’t know what the funding challenges of the future will be. I hope they are small - with minimal tax increases. But I think cities should have some ability to safeguard their future revenue generation.
There is an argument to fairness. Everyone should be subject to the same tax rules. Even deserving causes like educating elite children.
But overall, the biggest driver of gentrification was the campaign by Eva Webster to treat half of Brighton like it is the Back Bay. You can’t replace your windows, much less build new housing, due to https://www.boston.gov/historic-district/aberdeen-architectu... . That’s what caps the growth of housing and drives prices up.
There's also an argument for LVT applying to government land, just so that the public and decision makers are acutely aware of the rents being extracted from the public, if it's a parking lot or something like that.
How is that supposed to work, you tax the government and give the money to the public? It's not really going to affect their behavior if they're just paying a tax to themselves.
For example, if a public surface parking lot in a downtown area is owned by a city, and brings in $1M in revenue, but is taxed at $3M for its land values it's very clear what the subisidt is and who the beneficiaries are. And perhaps that might motivate the city to make better use of the lot, decide that there would be more public value as a park, or to build offices or housing on it.
Suppose you pass a law prohibiting anyone from constructing buildings with more than two stories. Well then you've just made the land artificially scarce because you need more of it to build the same amount of indoor space. Land value tax is useless in that situation because then all the land will end up with a two story building on it, they'll all be valued about the same (or someone would buy the cheapest one for the land and build a more expensive one), and you've effectively just reinvented property tax. And aren't really achieving the benefits a land value tax is supposed to bring, e.g. reduce housing scarcity by increasing the incentive to build housing, because it can't do that when building more housing is still separately prohibited by law.
Now suppose you don't do that. Anybody can build a ten or twenty story building anywhere, and there would be enough indoor space to satisfy local demand if every lot had a three story building on it. Since there is no additional tax on a tall building, people start putting them up until local rents fall to no longer cover the construction cost. Okay, working as intended. But that happens well before all the lots have a 10+ story building on them, so there are still plenty of lots available.
The question is, what happens to the other lots? Their value would be negative. You can't profitably put up a building there now that local rents are too low to cover the construction cost, but you'd still be paying the land value tax. Unless that's the endgame. Negligible land value, and therefore negligible land value tax?
For example, higher capacity for roads congestion, sewage, electricity connection etc.
At some point it almost seems like the tall building is freeriding on taxpayers.
Curious how you would address that?
The expenses of running roads and sewer are completely dwarfed by the gain in economic activity. Dense, high land value areas are the tax bases that subsidize the far less utilized and more-expensive-per-connection sprawl.
But what does this have to do with property tax? Roads can be funded by fuel taxes or car taxes, if not income taxes. Sewage and electrical systems are billed monthly to their users. Presumably a larger building will have a higher electric bill and if it doesn't it will be from devising a way of not using more electricity.
When there are extreme restrictions on what you can build, such as a maximum of two stories, then that "ability to build" has itself been turned into a finite resource; at that point both the structures and the land are economic land: finite resources that are not easily expanded. This is in contrast to capital, for which a person could theoretically build more of that asset.
This kind of comes back to the issue with valuing the land when the government is using it. Suppose they pass a law zoning that piece of land for use as a parking lot. The land value is then only going to reflect its value for use as a parking lot, since the law prohibits it from being used for anything else. Not taking into account zoning would produce a wildly inaccurate assessment of the practical value of the land, but taking it into account means that you're not taking into account the cost of the zoning restriction.
And the accounting for that is pretty weird. If you change to relaxed zoning on only a small section of land, the value of that land will be quite high because it's the only place you can build tall buildings. The reduction in regional scarcity from having a tiny number of tall buildings isn't going to outweigh the ability to build 10+ times more housing on those lots in particular. Whereas if you relax zoning over a sufficiently large area then it's the opposite. The increase in permissible density makes land in general less scarce, even in places that allow that higher density, because they're now common.
> There's the carrot of cheap purchase price of land, and the stick of high taxes if the land is being hoarded and underutilized.
The thing that worries me is that these are the opposite for the government. Creating artificial scarcity increases their tax revenue and also ingratiates them with local land owners unless the government is capturing all of the value of artificially scarce land. Which is supposed to be the theory with land value tax, but all they have to do is be off by as little as 10% and you're back to landlords lobbying the government for zoning restrictions.
And even if they get that right, when the government wants to spend money on things and they only get money when land is artificially scarce, what are they going to do?
As a general example, there are one million public schoolchildren in New York City, many who attend schools in some of the hottest real estate in the country. Requiring cities to put that on their balance sheet would mean that governments are highly incentivized to make children commute an hour into cheaper suburbs to get schooling.
Or move the school into a floor of a multi-story building which would significantly reduce its proportion of land value tax and in so doing consume less of that hot real estate and contribute less to housing scarcity.
Instead of creating new tax rules, why not remove 501c nonprofit status from all univesities or maybe from those with significant endownment or balance sheet?
Thats where the value really is. The land is just a subset of the overall assets.
Or if you want to be ambitious, just get rid of 501c for universities, period?
It's contemporaries are other not-very-american cities in NYC, Philly and DC proper. DC and Philly are cheap, NYC is dense. Boston has space and is expensive. It's an exception. Bostons tiny roads make driving impossible. It has actually history and protection worthy neighborhoods, so it a few towers do well to compensate for buildings that cannot be brought down. It has the infrastructure for amazing public transit (pre covid) and can easily support the extra density.
All of Boston's peer cities are European-esque cities in the US or European cities.
There is a good reason for that. What America calls European cities, are just called 'cities' elsewhere. Other than US, Canada and Australia....no other place has this wierd American model of car dependent asphalt sprawls.
So it is a good comparative bias.
(1) Massachusetts taxed nonprofit university endowments. (This would not directly improve services -- instead MA would cut personal income tax for the wealthy then reduce state funding for services like the legislature and governor did in 2023)
(2) In retaliation, universities built huge quantities of housing throughout the state, using their Dover Amendment exemption to avoid all zoning requirements. They would have to simulate an eligible use.
This would probably improve quality of life for communities - rents and home prices would go down due to the glut of new housing units.
That’s where I have an issue with it.
An example of countless articles:
https://www.wsj.com/articles/mormon-church-temple-spending-s...
And they pay taxes on any profits generated by their for profit subsidiaries:
https://www.sltrib.com/religion/2022/04/17/lds-wealth-spurs-...
"Churches with unrelated business income pay taxes on that income, Brunson noted, as the LDS Church reportedly does on its for-profit businesses."
So if you make profit and donate it to a charity, you can deduct it and they don't pay tax on it either. But if the charity makes a profit, effectively donating the money to itself, it does? What?
https://www.nbcnews.com/business/business-news/mormon-church...
Most churches (with the obvious exception of megachurches amongst others) do more good than harm. I feel like they are good for local communities because its one of the few places that people interact face to face, and the downsides of religion "brainwashing" probably happens more on the internet than irl.
Im ok with letting churches be.
As a child, this was how I always felt when the Catholic Collection Plate would circulate among the congregation.
>[doing good for community]
I also think that all hospitals should pay taxes — until there is some sort of single-payer universal healthcare institution.
Profit in this context means filthy lucre that the business owners have every right to spend on strippers and cigarettes and private islands. Churches are more restricted in what they can do with it and moreover tend to lose their patronage if that's what they're spending the money on, as opposed to private businesses whose patrons give money in exchange for books or food and don't really care if the owners are using the profits to play blackjack in Vegas.
> I also think that all hospitals should pay taxes — until there is some sort of single-payer universal healthcare institution.
What does that have to do with anything? Business operating expenses are generally deductible and their "income taxes" are effectively taxes on profit. A non-profit doesn't have any owners to receive profits, so they either operate with with a neutral budget or put any net income into an endowment that allows them to survive if future years are leaner or provide more services or charge lower prices.
Taxing them would only cause them to have lower quality or higher prices or go bankrupt more often.
That means churches getting to avoid taxes, unlike other not-non-profit organizations, has always been one of those things that should be resolved but hasn't because the people like breaking that law.
It's the same reasoning why "under God" should be removed from the national oath and Ilhan Omar should not be allowed to wear a hijab in Congress: Special accomodations and exceptions for religion are plainly unconstitutional.
Obligatory IANAL.
They made a special exception specifically for her on religious grounds, which is a violation of the government's Constitutional requirement to treat all religions equally as a part of guaranteeing freedom of religion.
If Congress had instead changed the rules so everyone can wear hats and head coverings that would have been fine, but that's not what they did.
[1] https://en.m.wikipedia.org/wiki/United_States_House_of_Repre...
> That means churches getting to avoid taxes, unlike other not-non-profit organizations, has always been one of those things that should be resolved but hasn't because the people like breaking that law.
No, that’s not what it means.
https://en.wikipedia.org/wiki/Church_tax
Now if we could just get them all to agree that funding a new minor league baseball stadium is ridiculous! Particularly with all the county funding in addition to tax rebates. <They already have a stadium that is suitable>
[1] Last local election cycle, of our 5 electable candidates THREE were decades younger than incumbent/predecesor.
We should be lowering government spending and lowering taxes, not trying to spend more.
These things have a target on them for pretending to be inclusive at all
But the only reason for that is because the common person & industry decided that university degrees are necessary for workplace eligibility. This is a half century aberration that will go away as quickly as it came about, and these 400 year olds institutions will continue being their isolated elite trading cards for a whole millenium
After seeing the inefficiency and incompetence of government bureaucracies for so many years, I’ve really come around to this idea. I don’t think we should have a libertarian free-for-all, because that carries its own problems. But I do think a great deal more policy could be effectuated through market-based mechanisms and private rights of action instead of clueless and corrupt functionaries.
No, you just hear more about the problems with government because they have much better accountability measures. Which is exactly why it's better for money to be taxed, and services run by governments, than these things handed over to the opaque and unaccountable NGO complex.
On the other hand I would accept the government’s position if it were to say aloud that there goal is for all large pools of money to be reclaimed by society. Double taxing wealth is then ok because it will, eventually, redistribute the wealth. In such a moral code, a $51bn pile of gold is quite an aberration.
It is classic right versus left: natural hierarchy versus we’re all the same.
An argument on Harvard’s side is that, in the grander scheme of things, they are part of a process that generates phenomenal tax revenue. The state takes their 40% cut off the top of every $150k CS and IB graduate salary after all. Is that a good enough benefit to let us tolerate Harvard’s pile of gold?
There is a related argument that if society is to be the ultimate recipient of the majority of benefits of a university system, then it should probably be state funded. Just like roads (public) trains (ish) electricity (not any more) and food (private but subsidised).