Friday, March 25, 2016

The Nutmeg State Dials For Dollars

As Connecticut descends further into the morass of debt (a tale told before by this blog), even after the past five years have seen the two largest tax increases in state history, our legislators are seeking even more inventive ways to squeeze cash from the ever diminishing pots of money left.  And it is diminishing.  Just recently, two of Connecticut's 15 billionaires left the state for the more tax-friendly environs of Florida and two more are considering making the move. These exits will have a materially significant impact on the state's finances.

Today's Wall St Journal reports that the Democratic president of the state Senate has proposed taxing the investment profits of Yale University's $25.6 billion endowment, the second largest in the country after Harvard (some have referred to Yale and Harvard as hedge funds that operate educational institutions as tax shelters).  Senator Martin M Looney stated:
"It is our hope that these rich schools can use their wealth to create job opportunities, rather than simply enrich themselves."
And, of course, what better way is there to create job opportunities that to give state government more money?

It's actually a pretty smart move by the money-hungry legislators.  Most corporations can more easily move their headquarters out of state, as General Electric is in the process of doing, but Yale is pretty much stuck in New Haven.  In the case of Yale, not only is its endowment not taxed, but the impoverished city of New Haven cannot levy property taxes on the university.

The Journal quotes a senior Yale official responding that the proposal is "plainly unconstitutional" and the university "would defend its constitutional right of non-taxation".  He also tried to defend the university by pointing out its pittance of an annual payment to New Haven of only $8.2 million from an institution that owns the bulk of the valuable property in the city.

But isn't this a moral, as well as legal question?  What about the children? And shouldn't Yale, a university at which many of its faculty have taken the lead in fighting income inequality do something affirmative to help the state?  After all, Yale is just one of 1,141 universities and colleges in the United States, yet its endowment is almost 7% of the total endowment of all of those institutions of higher learning and more than 70 times the average endowment.  Surely, they can spare a little?

Shouldn't Yale's administration listen to Yale's Institute for Social and Policy Studies which has campaigned so feverishly on the issue?

Shouldn't the administration listen to Thomas Pogge of Yale's Global Justice Program, who has said that inequality "undermines the social fabric"?

And to Robert Schiller, Yale Professor of Economics, who has argued that increased taxation should be used to attack inequality?

As well as to Yale University Press which has published numerous tomes on the scourge of inequality?

In addition to sharing the benefits of its endowment with the needy, it would be a noble gesture of all Yale faculty agreed that they would turn over any income in excess of the average household income in the state ($65,753) to go to a fund that would be shared among those making less than the average.

As a spur to action let us look at the concrete steps taken by Harvard and MIT to address this subject.

We await Yale's more considered response.

UPDATE:  Just after publishing this post, THC ran across William Russell Mead's take at his essential blog at The American Interest.  It's titled Blue Civil War Escalates, based on Mead's continuing series about the failure of the Blue Social Model:
Connecticut Democrats are going after Yale, for the same reason Henry VIII went after the monks and Willie Sutton went after the banks.

. . . desperate cities and states—caught between the unpayable pension promises created by decades of irresponsible governance, bloated workforces organized into unions that keep asking for more, poor residents wanting and needing more basic services, and rich residents threatening to flounce out of town unless they get more ‘amenities’—have no choice but to scrounge under the couch cushions for extra cash. And university endowments are a prime target.

Once Henry VIII discovered that you could squeeze gold coins from wealthy monastic foundations, he decided to squeeze harder. American politicians are no stupider than he was, and the need for revenue to feed Big Blue Machine is continuing to grow. The people who rule the Ivory Tower should start to take note.

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