Making the Case to Tax Harvard's Endowment

Massachusetts Should Tax Harvard (via Inside Higher Ed) (emphasis added):

Can you believe that the State of Washington actually wants to tax Microsoft? Doesn’t Washington realize that by taxing Microsoft it risks pushing the company to move its headquarters to a lower tax state? And even if Microsoft doesn’t pay taxes it still contributes to the state in many ways by, for example, promoting knowledge creation. Washington wants Microsoft to pay huge sums in taxes just because Microsoft earns astronomic profits. But Microsoft earned these profits through diligence and intelligence. Does Washington really want to punish Microsoft for its hard-earned success?

Washington State, of course, does tax Microsoft. And if Microsoft tried to get out of paying all taxes many college professors would curse the firm for displaying such naked greed. But Harvard University, the Microsoft of the educational world, feels itself entitled to tax exemption.

Some Massachusetts legislators want to tax rich colleges. Under their proposal, as reported on Inside Higher Ed, Massachusetts colleges would pay a 2.5 percent tax on all assets over $1 billion. (The idea is part of a broader push to question whether some colleges with hefty endowments are inappropriately hoarding wealth while continuing to raise their tuitions sharply.) Nine schools, including Harvard and Smith College (my employer), are wealthy enough to be subject to the tax.

The tax would harm higher education in Massachusetts. But almost all taxes inflict harm. Taxing software companies, for example, reduces their output and increases their prices...

...Florida, however, does tax its orange industry. A state that didn’t tax its most successful industries would have to impose higher taxes on less successful businesses and so would further impede these businesses’ fortunes.

Taxes are like poison. Taking a lot is fatal, but exposure to small quantities only moderately harms health. The best way for a government to tax, therefore, is for it to spread around its tax poison broadly so no entity must consume too much of it. If Massachusetts is determined to collect a certain amount of taxes from organizations (such as corporations), then it will do less harm if it forces all organizations to pay a little than if it mandates that a subset pay a lot...