It’s been said before that Connecticut has become a national laughing-stock for the perennially ham-handed and futile attempts legislators make to quell our state’s permanent fiscal crisis and create jobs. Unfortunately, the General Assembly’s latest harebrained revenue scheme does little to dispel that image.
On the positive side, we have a governor who, now that GE is leaving, wants nothing to do with trying to tax the endowment earnings of easily the most prestigious organization remaining in the state (even as a Wesleyan man, I’ll concede that).
Don’t get me wrong. I carry no brief for Yale, which is essentially a corporation with a $2.5 billion annual budget and an endowment of more than $25 billion — second only to archrival Harvard at $37 billion. But the effort to tax the Yale endowment, spearheaded by Senate President Martin Looney, is indefensible on all but the most rapacious of levels.
As I’ve written before, I really have no problem with shaming Yale and other wealthy nonprofits into contributing more financial resources to the communities in which they’re located. And it’s not just the universities that need to step up. The big New England boarding schools like Choate and Hotchkiss have endowments that are the envy of many colleges. They, too, should do more.
To be fair, most of them already contribute something. Yale does pay property taxes of more than $4.3 million to the city of New Haven on its golf course and its University Properties retail locations. And for more than 20 years, Yale has made voluntary annual contributions to the city of New Haven — $8.2 million this year and at least $90 million since the university started the program in 1991.
And of course, the city of New Haven receives from the state payments in lieu of taxes (PILOT) to partially compensate the city for the tax-exempt properties within its border — some $43.6 million in PILOT in 2014 alone. In Berkshire County, Mass., little ivy leaguer Williams College has pledged $5 million toward the rebuilding and maintenance of a mold-infested local public high school whose locker room roof collapsed several years ago.
Back in New Haven, Yale’s economic impact on the state is staggering. Yale spokesman Richard Jacob says the university is Connecticut’s fifth-largest employer, paying out $2 billion a year in wages and benefits. In addition, students and visitors spend an estimated $150 million annually.
Rather than target Yale specifically, Looney’s proposal is crafted to tax only colleges and universities with endowments exceeding $10 billion and only “excess earnings” that universities don’t invest in higher education or the economy. Since no one else’s endowment in Connecticut even comes close to $10 billion — and won’t anytime soon — you’d have to think of Looney’s bill as simply the “Yale Tax.”
“It is our hope that these rich schools can use their wealth to create job opportunities, rather than simply to get richer,” Looney recently said with a straight face.
Dubbed “The Looney Principle” last week by Journal Inquirer columnist Chris Powell, both the rationale and the goal of the senator’s plan were clear: The wealthy should pay their fair share; Yale has tons of money; and we know better how to spend it than Yale’s board of trustees.
And it’s not even clear whether a tax on Yale’s endowment earnings would hold up in court, seeing as the university’s tax-exempt status is actually enshrined in the state constitution. Now try to imagine a statewide referendum for a constitutional amendment whose sole purpose is to tax one organization. Good luck with that one.
Of course, it might be possible to tax not the colleges but those who use them. The city of Pittsburgh, which after the decline of the steel industry revived its economy with tax-exempt hospitals and universities, gave up trying to convince the commonwealth of Pennsylvania to change its laws against taxing nonprofits. Led by an energetic and very young mayor, city officials seriously considered enacting a citywide sales tax on tuition payments at Pittsburgh’s 10 colleges and universities.
The mayor ultimately dropped the proposal — and with good reason. If tried here, the tuition sales tax wouldn’t conform to Sharkey’s narrative of going after the big kid on the block, but would instead slap more of the burden of fixing the sins of spendthrift politicians onto the backs of parents seeking a better life for their children.
Wheedling colleges and universities into contributing more to the financial well being of their communities is justifiable, considering the obvious strain they put on municipal budgets. But what kind of strain do the colleges put on state services? None that I’m aware of.
Nope, the state wants the money of Yale’s heavy-hitters for one reason: because they have it. Kudos to Gov. Malloy for putting the kibosh on the idea. And may it die a quick and painless death.
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