Harvard: Too Rich to Be a Nonprofit?

Have you heard about Harvard’s latest donation? It is for 350 MILLION DOLLARS and is the third biggest gift in the storied history of people giving their money to universities and having dorms named after them. This time the guy is naming the entire School of Public Health after his dad. Seems fair!

Also seems like a good time to postulate about the purpose of non-profits beyond their technical definition, non? Annie Lowrey writes for The Daily Intelligencer arguing from, among other reasons, a utilitarian standpoint (Annie!) that Harvard is officially way too rich to be one.

There’s an old line about how the United States government is an insurance conglomerate protected by an army. Harvard is a real-estate and hedge-fund concern that happens to have a college attached. It has a $32 billion endowment. It charges its rich students — and they are mostly from rich families, with many destined to be rich themselves — hundreds of millions of dollars in tuition and fees. It recently embarked on a $6.5 billion capital campaign. It is devoted to its own richness. And, as such, it is swimming in cash.

Lowrey concedes that Harvard is the “Platonic ideal of a nonprofit” by definition, and that it does do a lot of public good (research! etc!) but still, they’re spending a billion on updating their dorms, ok?

If it wanted to maximize its $32 billion worth of utility, it could, say, admit more students, especially poor ones, reduce its focus on property development, and double down on its focus on research, which currently makes up $800 million of its $4.2 billion in annual operating expenses.

But there is a way to encourage the university to do that, or at least to ensure that it is also contributing more to the public good. That is to take away some of Harvard’s tax exemptions, as suggested by legislators in Washington and Massachusetts, as well as a number of economists. The idea is that such megarich schools hoard funds and real-estate, tax-free, to the detriment of local communities or federal coffers, a situation that could be remedied with a wealth tax on endowments over $1 billion, property taxes, or a tuition sales tax.

Consider how much real estate Harvard owns, how much they drive up real estate prices, and how little they contribute in property taxes. Hmmm!

I am also fascinated by the idea that no, they do not exist to make anyone rich with their literal profits, but are they not in a way surrounding everyone involved with the money and power and privilege that comes from their profits? It’s such an old money, tax-advantaged way to handle your wealth.