Democrats: We like quality, accessible education, unless private schools provide it.

The hypocrisy of politicians can absolutely astound me at times. One of the themes that the Democratic Party likes to tout is their support for making college more affordable and accessible to lower-middle income families. Apparently, Democratic Massachusetts State Rep. State Rep. Paul Kujawski didn't get the memo.

Massachusetts legislators, demonstrating a growing resentment against the wealth of elite universities in tight economic times, are studying a plan to levy a 2.5% annual tax on the portion of college endowments that exceed $1 billion.

The effort takes aim at one of the primary economic engines of the state, which is home to nine universities with endowments that surpass the $1 billion level, led by Harvard University's $35 billion cache, the nation's largest.

The Massachusetts House recently approved sending the proposal to the Department of Revenue for further study. The inquiry is expected to take months and few in the education field expect it to yield changes in the tax law.

Supporters said the proposal would raise $1.4 billion a year. Based on the most recent size of Harvard's endowment, the university would have to shell out more than $840 million annually.

This, while Harvard is unveiling a new financial aid regimes stipulating that families earning less than $60,000 a year pay NO tuition, and families earning less than $180,000 a year pay no more than 10% of their income.

This is, quite simply, a stupid idea. Universities with large endowments get those usually because they are either very good universities or because they have very rich alumni (which is probably because they are very good universities). Taxing large endowments will have a number of negative impacts. It will take away a significant incentive for universities to improve, which would generate more endowment donations and increase their ability to compete with the likes of Harvard for top students. (Of course, a tax this small will be a drop in the bucket for Harvard; it's really going to affect universities with endowments much smaller and closer to the floor threshold for the tax.) It will discourage financial aid initiatives like the previously mentioned on by Harvard as well as capital investments. For universities under the $1 billion endowment, the tax could lead to them increasing tuition in order to fund projects rather than accept gifts/donations in order to remain below the $1 billion cut off to avoid tax liability. From a more macro perspective, it could even lead to some liquidation of assets held by these endowments, which, considering the sizable holdings in some of these funds, could have a real adverse effect.

One wonders why there would even be need for such a tax. If there is a deficit in Massachusetts that needs closing, there are plenty of other taxes they could raise or impose. (Since it is, after all, the People's Republic of Massachusetts, I will assume that spending cuts are completely off the table.) In my humble opinion, the opening sentence of the cited excerpt reveals that perhaps this idea is coming to the forefront for no need at all.

Hat tip to Free Exchange for this one. Greg Mankiw, a Harvard employee, also has a post about this.