Tom Keane

Yes, The State Needs More Money — But Jay Gonzalez's Plan Is All Wrong

Sometimes politics is so confusing.

I was outraged when a year ago the Republicans, backed by the henchman in the White House, pushed through a “reform” which included new taxes on the endowments of colleges and universities.

We all understood this for what it was: a thinly veiled attack on the blue states that seem to house a preponderance of elitist higher ed institutions. Democrats rose together in their opposition. They denounced the new levy as a bullying, anti-intellectual move, one orchestrated by a White House that showed nothing but disdain for science and progress.

And now along comes Jay Gonzalez to completely upend the narrative.

Gonzalez, the Democratic nominee for governor of Massachusetts, has proposed a breathtaking new tax on Bay State colleges and universities, an elephantine proposal that makes last year’s tax look like a gnat in comparison.

The Trump tax, as loudly as it was decried, levied a simple 1.4 percent tax on the earnings of college endowments. Gonzalez, by contrast, would levy a 1.6 percent tax on the entire endowment itself. And the plan would raise a lot — perhaps as much as a billion dollars a year. Harvard — everyone’s favorite target — would itself be coughing up $563 million.

So as a dutiful Democrat, do I now need to support Gonzalez’ plan?

No, no, no! Bad ideas are bad ideas, no matter which side of the aisle they hail from.

Give Gonzalez credit for fitting right into the caricature of a free-spending Democrat. All this new money would go for lots of transportation and education goodies. But give Gonzalez demerits for not being willing to ask ordinary citizens to fund all these goodies. Instead, he looks around some convenient target.

At first, it was the wealthy, who were going to get their pockets picked under the so-called Fair Share Amendment -- aka, the millionaires’ tax. If put to a vote, that idea would easily have become law — those of us who aren’t millionaires clearly outnumber those who are — until it was quashed by the state’s Supreme Judicial Court in June.

You can just imagine Gonzalez and his policy guys sitting around, mulling how to get the money they so desperately want to spend. It’s like the scene in "Lord of the Rings" when some famished orcs contemplate the hobbits as food: “What about their legs? They don't need those. Ooh! They look tasty!”

So too with college endowment funds. The money’s just lying around, doing nothing. And boy, it looks tasty.

The thing is, tasty as it may look, it’s not just lying around.

Gonzalez rips into colleges as “those institutions that have accumulated so much wealth,” as if they were just an ivy-covered version of some tech company plutocrat. He seems to misunderstand what that “wealth” really is.

The idea behind endowments — be they for higher education or any other nonprofit — is to create a pool of capital that generates interest. That interest in turn funds operations. Ideally the amount of interest generated (plus other recurring revenue, such as tuition) is all the nonprofit spends, so the bigger the endowment, the more interest is generated — meaning the nonprofit can in turn do more of what it was organized to do.

In the case of Harvard and other colleges, the gigantic endowments (Harvard’s is tops at over $36 billion) allow schools to fund a variety of programs such as research, campus improvements and financial aid. That’s what allows Harvard to provide scholarships to almost all of but the most wealthy of its students — including free tuition for families making $65,000 or less. The result is a more diverse student body drawn from all walks of life — something, one would think, Democrats would applaud.

And Gonzalez’ proposed tax? It simply eats into the school’s endowment, shrinking it in size, meaning there is less available for programs such as tuition assistance. It also discourages donors from giving more — since a portion of any donation they make is now just going to the state, they’ll likely wonder: Why not give to a nonprofit that isn’t taxed at all? Moreover, given that the Massachusetts economy is dependent on higher ed (and on the smart and educated workforce it creates), it feels foolish to be disadvantaging ourselves via a vis the other 49 states.

Yeah, it’s easy to see the big schools as piggybanks. But some piggybanks shouldn’t be broken.

This column was first published by Cognoscenti on September 20, 2018.

 

5 Takeaways From The Mass. Primary Election

Politics in the Bay State matter. Maybe it’s because our politicians like to run for president (Ted Kennedy, Mike Dukakis, Paul Tsongas, John Kerry and Mitt Romney to name but a few — with perhaps as many as five in 2020). Maybe we’re seen as a bellwether. Or perhaps we’re just so full of ourselves we think everyone else cares when in truth they don’t. In any event, herewith a few observations in the aftermath of the Massachusetts primaries.

Not all incumbents lost. Tuesday’s primaries — at least on the Democratic side — are being read as something epic, a dramatic break from the past. “Massachusetts politics is changing,” opined the Boston Globe’s editorial board. “Candidates aren’t willing to wait their turn anymore. The power of incumbency is weakening.” Aside from the fact that these words sound curiously like the opening monologue of "The Lord of the Rings" (“The world is changed…”), there’s reason to be skeptical. The hyperbole notwithstanding, incumbents did very well. Longtime Secretary of State William Galvin handily defeated upstart Josh Zakim. U.S. Rep. Steve Lynch readily fended off two foes. State Rep. Liz Malia easily bested her challenger. Indeed, the vast majority of pols — at all levels — faced no meaningful competition at all, including the attorney general, treasurer, auditor, most members of Congress and most state legislators. The three felled incumbents — Michael Capuano, and state Reps. Byron Rushing and Jeffrey Sanchez — were the exceptions, not the rule.

Marty Walsh should be very afraid. Ayanna Pressley won her unexpected congressional victory despite Boston Mayor Marty Walsh endorsing incumbent Michael Capuano and despite Walsh’s machine pulling out the stops to re-elect the congressman. He looks weak and Pressley owes him nothing. Maybe Pressley will love being a member of Congress, but my guess is the experience will wear thin: Power in D.C. is connected to seniority and that requires exceptional patience. So why not run for mayor? The position is up in 2021. It is, as late Mayor Tom Menino once told me, “The best job in politics.” Judging by the primary’s exceptionally high turnout, Pressley may well be the most popular politician in the city. The majority-minority demographics that drove Pressley’s success equally apply to a mayor’s race. She’s well-versed in bread and butter local issues (e.g. liquor license reform) that are better addressed at the city level than the federal level. And best of all, Pressley can take a shot at the job without giving up her congressional seat — Boston elections are held in odd years while congressional elections are in even.

Capuano did better in 2018 than when he first won the seat — but he still lost. Capuano first won his seat in 1998, in a crowded field of 10. (It’s a race I remember well; I was one of those 10.) Back then, he won just 23 percent of the vote, but that was enough to give him a plurality — and since the district is overwhelmingly Democratic, the general election was just an afterthought. Until Pressley came along two decades later, Capuano had never faced a serious one-on-one primary challenger. It’s a lesson for the 3rd Congressional District, the seat being vacated by Niki Tsongas. That race, too, had a 10-person field of challengers. The winner (and right now, it’s either Lori Trahan or Daniel Koh) will get the job with less than 22 percent of the vote. How would either fare in a one-on-one race with a credible primary challenger? Capuano was able to wait 20 years before finding out the unhappy answer to that question. Memo to aspiring pols in the 3rd district: There’s no reason to wait so long.

Elizabeth Warren is now free to focus on 2020. Republicans had a field of three candidates vying to take on Warren. In Geoff Diehl, they chose the weakest of the three. Diehl is a state rep and hardcore Donald Trump supporter in a state that intensely dislikes the president. For Warren, this is a godsend; she’s now a certainty to win re-election. She can safely ignore Diehl, spending the rest of the campaign season raising her national profile as she eyes the presidency. Meanwhile, Diehl’s win (and the surprisingly strong showing of Scott Lively against Gov. Charlie Baker) also speaks to the continuing and growing irrelevance of the GOP in the Bay State. Yeah, Baker’s governor — but largely because he presents as a moderate Democrat. Only 10.4 percent of all voters are registered Republicans (Democrats are three times as many), meaning the party increasingly looks like an asterisk.

Charlie Baker is a lock for re-election. Unless he isn’t. Baker is the most popular governor the world has ever known. (OK, slight exaggeration. But he’s still the nation’s most popular governor right now.) And as of its most recent filing, the Baker Committee has $6.3 million while Jay Gonzalez — winner of a lackluster Democratic primary — has only $188,000. Obvious conclusion: Baker should coast. But. But. But. Donald Trump is president and the leader of Baker’s party. One could see the deep and passionate anti-Trump animus in Massachusetts easily spilling over to a more local race. And Gonzalez is actually a credible, serious and qualified candidate. He served as the secretary of administration & finance during the Patrick administration — the same job on which Baker cut his political teeth in the Weld and Cellucci administrations. Sure, the smart money is on Baker. But then again, that’s what many said about Capuano.

This column was first published by Cognoscenti on September 6, 2018.