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Harvard Has Become a Tax Shelter for Billionaires as Public Education Languishes

Massachusetts needs to reevaluate the tax-exempt status of its private universities with endowments over $1 billion.

A statue of John Harvard is pictured at Harvard University in Boston, Massachusetts.

Part of the Series

On April 11, 2023, Harvard University announced that the billionaire hedge fund CEO Kenneth C. Griffin is donating $300 million to Harvard’s Faculty of Arts and Sciences to fund research and scholarship. Griffin will reduce his federal income tax bill by an estimated $110 million, according to the Los Angeles Times.

As a faculty member at the flagship Massachusetts public university, the University of Massachusetts Amherst, I felt dismayed. With an estimated value of over $50 billion, Harvard’s endowment is larger than the GDP of many of the world’s countries, including Bolivia, Paraguay and Sierra Leone. Harvard is richer than companies like General Motors, Coca-Cola and Intel. It doesn’t need more money — but public universities desperately do.

At UMass Amherst, I’m privileged to teach some of the commonwealth’s best and brightest undergraduates who come to campus because we claim to offer an affordable, high-quality education at a fraction of the cost charged by private institutions such as Harvard. But the conditions under which students and faculty teach and learn at UMass are consistently poor. In Herter Hall, which houses many of the university’s humanities departments, including my own (History), the water fountains are routinely out of order and the insulation in the ceilings is leaking. The elevators in many of the buildings are consistently broken, causing huge obstacles for students (especially those with disabilities) to pursue their studies. With an endowment of only $1.12 billion, the UMass system has a mere fraction of the resources of Harvard — despite enrolling more than double the number of students (73,979 versus Harvard’s 35,276).

Like many wealthy private universities, Harvard claims that “public service is fundamental” to its institutional ethos. But the social benefits of these private institutions are trivial in comparison to the civic good of public higher education. As a 2020 Brookings Institution report found, “public colleges contribute substantially more [than private institutions] to upward [economic] mobility overall because they enroll many more students.” By contrast, as scholars such as Davarian Baldwin have shown, the presence of wealthy private institutions tend to make their communities worse off by depriving municipalities of tax revenue, inflating the cost of housing, and creating private police forces that militarize surrounding neighborhoods. The victims include the working-class employees of these very universities, who often cannot afford to live near their workplace and can be excluded from assistance programs designed exclusively for faculty and high-level administrators.

The problems at UMass and at other public institutions of higher education in the Commonwealth of Massachusetts extend beyond the decrepit physical condition of our campuses. Tuition is rapidly increasing, many students experience hunger and homelessness because of the skyrocketing cost of living, and the state’s residents hold $30.8 billion in student loan debt. At UMass Boston, graduate student stipend rates are below $22,000 a year — in a city where making $100,000 feels like bringing in less than $50,000 when you factor in the cost of living.

When it comes to higher education, Massachusetts isn’t a democracy — it’s a plutocracy, in which a few wealthy private universities hoard resources while the underfunded public higher education system is forced to shift costs to students.

From afar, the crisis of public higher education in Massachusetts might seem surprising. After all, by some accounts, Massachusetts has the best public primary and secondary schools in the country. According to a survey by WalletHub, the state’s population has the nation’s highest percentage of both bachelor’s holders and graduate or professional degree holders, leading some to call it the U.S.’s “education state.” But while Massachusetts ranks among the highest states in terms of dollars spent per pupil in K-12 education, its appropriations for higher ed are quite average. The Hildreth Institute reported earlier this year that “state-funded financial aid in Massachusetts was cut by 47 percent between 2001-2021. Despite being one of the wealthiest states, Massachusetts ranks 37th in the nation in state-funded financial aid to residents and its students carry the 5th highest debt burden in the nation.” At the same time, since 2000, tuition and fees at Massachusetts community colleges have risen over 50 percent and nearly 60 percent at the state’s four-year public universities. When it comes to higher education, Massachusetts isn’t a democracy — it’s a plutocracy, in which a few wealthy private universities, such as Harvard, MIT and Tufts, hoard resources while the underfunded public higher education system is forced to shift costs to students.

Massachusetts Gov. Maura Healey’s proposed $140 million budget for capital investments in public higher education is a step toward rectifying these inequities. But it remains woefully inadequate given the scale of the need — and it doesn’t help that the governor is at the same time trying to push through a set of highly regressive tax cuts which, according to the Massachusetts Budget & Policy Center, “overwhelmingly benefit wealthy households” and “would cost the Commonwealth roughly $390 million in annual revenue.”

Many of the reactions to Griffin’s gift to Harvard have focused on his support for Florida Gov. Ron DeSantis, who is currently attacking academic freedom in his state’s public university system. DeSantis is also rejecting AP African American studies in high schools and banning books from Florida’s public libraries. Griffin donated over $10 million to DeSantis’s past two gubernatorial election campaigns, and while his support for DeSantis’s presidential bid is currently ambiguous, he has parroted the Florida governor’s reactionary condemnation of “woke ideology.” Indeed, it is cruelly ironic that Griffin would at once support intellectual exchange at a private institution while at the same time backing a political official and probable GOP presidential candidate who is trying to restrict it at public ones. But the most egregious aspect of the situation is the fact that donations on the scale of Griffin’s gift to private universities like Harvard are even possible. It’s outrageous that a single billionaire can — with just one donation! — exceed the amount of money that can be raised for public education from millions of the Commonwealth’s taxpayers. Do we really want to live in a state and a society with such gross and massive inequities between its public and private universities?

Massachusetts needs to reevaluate the tax-exempt status of its private universities with endowments over $1 billion.

Research has consistently shown that increasing investment in public higher education is the surest way to building a thriving, equitable economy in states such as Massachusetts. To rectify these inequities, I’d like to propose that in addition to massively increasing taxpayer funding for public higher education, Massachusetts needs to reevaluate the tax-exempt status of its private universities with endowments over $1 billion.

Private educational institutions are currently exempt from state income taxes — symptomatic of a broader national problem through which private universities act as tax shelters, profiting off their knowledge-generating activities while avoiding making investments in public services, such as transportation, street cleaning and public works, even as they benefit from them.

Some municipalities, including in Massachusetts, have tried to address this exemption by introducing so-called PILOT programs, or “payments in lieu of taxes,” through which governments make arrangements with large nonprofit organizations in their jurisdiction for voluntary contributions to offset some of the loss of tax revenue. But the PILOT arrangement between Boston and Harvard, through which the university is supposed to annually contribute to the city a mere 25 percent of the property taxes it is exempt from paying, has been a total failure: Harvard has never actually paid the full amount of any of the city’s annual PILOT requests.

The failure of the Boston-Harvard PILOT agreement demonstrates the naivete of banking on the civic-mindedness of wealthy private universities to voluntarily contribute to the public good. Whatever lofty claims they may make on their websites about the virtues of public service, such institutions are ultimately in it for themselves. (Case in point: even with a $50 billion endowment and all its tax breaks, Harvard has the audacity to charge the public for the privilege of visiting its museums!)

Billionaire individuals shuffle funds to billionaire institutions and get a tax break for doing so while students go into increasing amounts of debt to attend public universities.

A far more aggressive, legislative solution is necessary: the very wealthiest of these universities — which in Massachusetts, in addition to Harvard, include Tufts ($2.4 billion), Williams College (endowment: $3.5 billion), Amherst College (endowment: $4 billion) and MIT (endowment: $24 billion) — should be required to pay both property taxes on their considerable real estate holdings and state taxes on their endowment returns, with the funds redirected toward institutions of public higher education and other social needs. Furthermore, wealthy private institutions such as Harvard should be required to divert a percentage of all the donations the institution receives to public education — and the tax status of such donations to the very wealthiest private institutions should also be reevaluated, so that there are stricter limits on the amount that donors can write off on their returns.

There is something profoundly disturbing about a system of higher education that allows a few private universities who serve a minority of U.S. college students to hoard resources and wealth while its public institutions, which serve the majority, suffer. It’s long past time to end the swindle where billionaire individuals shuffle funds to billionaire institutions and get a tax break for doing so while students go into increasing amounts of debt to attend public universities. Relying on the good will of rich private colleges to contribute to civic welfare will not work, precisely because these institutions are ultimately accountable only to themselves. What is needed is a democratic solution that redirects funding and resources to public higher education, rather than our current system, which allows the rich to get richer.

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