Massachusetts looks at taxing legacy admissions

A bill in Massachusetts seeks to tax rich colleges that favor families of alumni and donors in admissions policies — namely Harvard University — and give the money to poorer community colleges.

The legislation targets Harvard, Williams College and a half-dozen other schools that use preferences for students whose parents attended the college, called legacies, and meet a threshold of current endowment value per student. Cambridge-based Harvard, the richest U.S. college with a $50.1 billion endowment, would be assessed an estimated $103 million a year, the largest fee, according to sponsors.

The measure is another salvo in the attack on the admission policies of universities. Last week, the conservative majority on the U.S. Supreme Court effectively shut down race-based affirmative action. Then on Monday Harvard was accused by minority groups of violating federal law by giving preferential treatment in the admissions process to children of alumni and wealthy donors.

Michael Fein/Bloomberg

Two Massachusetts legislators, both Democrats, proposed the bill earlier this year in anticipation of the Supreme Court's decision. It uses a formula determined by endowment value per student to determine fees based on a sliding scale. The money collected annually would go to a trust to fund community colleges. The measure is opposed by an association of private colleges in the state.

Policies for legacies have no place in admissions that purport to advance social and economic mobility, said state Representative Simon Cataldo, who filed the bill with state Senator Pavel M. Payano. Nine other legislators have signed on.

"The schools could not simultaneously defend race-conscious affirmative action – which benefitted historically disadvantaged minorities — while also insisting on maintaining admissions policies that elevated the chances of generationally wealthy applicants above those very groups that race-conscious affirmative action was meant to help," said Cataldo, a former teacher.

Harvard declined to comment on the bill.

Selective colleges often take into account if an applicant's parent attended the school, a factor that can help when the rate of acceptance at schools like Harvard fall into the single digits. Colleges maintain they're building a community from parents who donate to the school and help boost financial aid budgets to benefit less-wealthy students. Opponents say the practice is unfair because it rewards wealthier applicants. 

Targeting endowments

College endowments have long been a target of lawmakers who want them to redistribute their wealth, with proposals failing in Massachusetts in 2018 and in Connecticut in 2016. The latter legislation eyed Yale University's riches, now valued at $41.4 billion.

The federal government successfully taxed more than three dozen private universities as part of the Republican-led tax cut in 2017. The colleges, including Harvard, Yale and Princeton universities, have been lobbying to remove it since the 1.4% levy on net investment income passed. The tax helps fund corporate tax cuts.

Many of the Massachusetts schools that would be charged fees for community colleges also pay the federal tax, which affects schools with $500,000 of endowment per student, including Amherst and Williams colleges.

While Amherst has been one of the few selective schools to scrap legacy admissions, it uses early decision, another tool that helps wealthier students because they commit to a college without having to wait for multiple offers of financial aid. Amherst would pay $5.7 million annually on endowment assets, and Williams, the richest liberal arts school, would pay $8.4 million, according to estimates by the bill's sponsors. Both schools, which have assets of more than $3 billion each, declined to comment.

The second-richest college in the state, Massachusetts Institute of Technology, wouldn't pay anything. It doesn't use binding early decision policies or legacy preferences.

The Massachusetts bill was considered at a hearing on June 27 and has been referred to the Joint Committee on Higher Education. 

Banning early admissions would put colleges in the state at an "enormous disadvantage" because it could prompt Massachusetts students to leave the state and would take away a choice that families should make, not the legislature, said Rob McCarron, chief executive officer of the Association of Independent Colleges and Universities in Massachusetts.

 "Legislative policies addressing college affordability and access should focus on keeping and attracting students — our future workforce — to the state that leads the nation in higher education, not drive them away," McCarron said in a statement. "This is why we continuously advocate on both the federal and state levels for additional investments in financial aid that will help every deserving student attend the college that is the best fit for them and their families."