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By Jamison A. Hill, Crimson Staff Writer

The Massachusetts House of Representatives considered an amendment to the budget Monday that would impose a 2.5 percent tax on universities with endowments of over $1 billion, a proposal that would impact schools like Harvard and MIT, both of which have endowments of at least $10 billion.

The proposal, made by Representative Paul Kujawski of Worcester, did not pass but could be sent to the Department of Revenue for further study.

Harvard’s director of federal relations, Kevin Casey, called the legislation “ill-advised” and said that this would probably be reflected in a study.

“We think that any study would reveal that taxing endowments over a certain amount is probably not good public policy and would be counterproductive because it would handicap some of the institutions that contribute positively to the economy,” Casey said.

Casey said that Harvard makes payments in lieu of taxes to its host communities, in addition to adding substantially to the local economy.

“Harvard, MIT and the area-hospitals tend to be consistent producers of economic growth because we don’t tend to be affected by markets,” Casey said.

Harvard’s $35-billion endowment has also drawn scrutiny from Washington, where Senator Charles E. Grassley, an Iowa Republican, has proposed legislation to make universities spend five percent of their wealth each year, as foundations must.

Michael J. Widmer, president of the Massachusetts Taypayers Foundation, a business-friendly research organization, said that the debate over taxation of large nonprofit institutions is a perennial local issue, but rarer on the state level.

“So there is an ongoing discussion about whether nonprofit institutions, particularly large ones like Harvard, pay their fair share because they are tax exempt,” he said.

Widmer, who holds a PhD in economics from Harvard, said that he believes that nonprofit endowments should not be taxed. He said a tax could disincentivize alumni giving because donors may not want their donations to go to the state.

“The temptation for some legislators is to assess these endowments as a way to help fund state programs,” he said. “Then there is a sentiment that these universities can afford that, but I don’t think that’s fair.”

Casey said that this debate intensifies during downturns in the economy when states may be facing large budgetary crunches.

“It’s an ongoing discussion,” Casey said. “And it’s an appropriate one to have because we are a tax-exempt institution, so we should be accountable.”

Grassley, the ranking member of the Senate Finance Committee, sent letters in January to the 136 wealthiest colleges in the nation asking for detailed information about their finances and operations.

Harvard completed the voluntary 11-point questionnaire in February, releasing detailed information on its endowment and financial aid funds.

­—Staff writer Jamison A. Hill can be reached at

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