Democrat for governor Jay Gonzalez said his plan to tax the endowments of wealthy private universities should not inhibit schools like Harvard University from funding research and financial aid, two reasons Democrats like Sen. Elizabeth Warren opposed the idea when President Trump offered it.
Gonzalez, who has been under pressure to detail how he would raise revenue to pay for his campaign promises, pitched a plan Tuesday to generate nearly $1 billion in state revenue by taxing the endowments of the state’s nine wealthiest colleges and universities.
The money, the Democratic gubernatorial candidate said, would be put toward education and transportation to accelerate improvements to the MBTA, roads and bridges and make affordable preschool and debt-free public college tuition more accessible to families.
“It is time for them to pay their fair share to help make our economy work for everyone in this state, not just those at the top,” Gonzalez said at a press conference outside the Cambridge Red Line station, steps from Harvard Yard. He was joined by Cambridge Mayor Mark McGovern and Quentin Palfrey, the Democratic nominee for lieutenant governor.
Gov. Charlie Baker, who is under pressure to improve MBTA service, immediately rejected his opponent’s plan as one that would take financial aid away from deserving students, echoing concerns raised by Warren, U.S. Sen. Ed Markey and other Democrats when an endowment tax became part of the GOP tax cut plan.
“I start with the proposition that when President Trump proposed this idea, I thought it was a bad idea then, and I still think it’s a bad idea,” Baker said. Warren, who has been campaigning with Gonzalez, could not be reached for comment.
The 1.6 percent tax, according to Gonzalez, would be a “modest” levy on private institutions that have accumulated “enormous wealth,” in part because of their tax-exempt, non-profit status. The tax would apply to the endowments valued at more than $1 billion.
“This modest tax will raise meaningful new revenue to address critical needs in education and transportation that will benefit regular people throughout this state while still allowing the schools’ endowment and wealth to grow over time to support their own purposes,” Gonzalez said.
Gonzalez said the tax rate he is proposing amounts to just one-third of the average annual growth rate of the worst performing endowment of the nine impacted schools, which would be Wellesley College’s endowment.
The Gonzalez campaign said it consulted with groups like Service Employees International Union and Sen. Jamie Eldridge on its development of the plan, as well as economists who the campaign declined to name because they work for universities that would be impacted by the tax.
Baker said he opposed the plan “because the vast majority of the money that is used in endowments supports scholarships and financial aid, most of the time, for low-income and middle-income students.”
Gonzalez released his tax plan the same day that the Commonwealth Future super PAC went up on statewide television with a new ad contrasting Baker and Gonzalez’s approached to taxes. The super PAC reported spending $1.6 million on an ad buy in its most recent report, backed by another substantial donation from the Republican Governors Association, which has now poured $4.56 million into the Massachusetts governor’s race.
The ad credits Baker for building a $1 billion surplus while holding the line on taxes, in contrast to Gonzalez’s “long history of supporting tax increases.”
A WGBH poll released this week found that 50 percent of Americans oppose taxing university endowments, while 43 percent support the idea.
Gonzalez said his proposal was not poll tested, but was a “fair” way to address “critical needs in the state.”
“I’m sorry, but Charlie Baker’s insistence that we don’t need to invest more in our transportation system, his plan to make the T work for people in 15 years is totally unacceptable. People are going to have a choice,” Gonzalez said.