Students Rally, Admin Expresses Concern Over Endowment Tax Bill

Last month, a group of Amherst students took to the town common with signs reading “Tax Amherst College’s Endowment, Fund Public Education.” The group, largely members of the Amherst chapter of the Young Democratic Socialists of America (YDSA), were protesting in support of Massachusetts Bill H.2824, which would mandate a tax on the college’s endowment.

The bill, which was proposed to the state’s house of representatives this year, would tax all Massachusetts private university endowments larger than $1 billion — including 11 other schools alongside Amherst — at a rate of 2.5 percent annually, according to Massachusetts legislature. The endowment tax is proposed for the purpose of redistributing money toward public education in the state of Massachusetts.

Amherst YDSA Co-Chair Isabelle Anderson ’25 argued that the tax would allow the college to give back to its community. “Amherst says they put forth money towards funding public education in the state,” she said. “They could do so much more.”

She added that the tax is “about the people who live here, which include faculty members, which include staff who all have to send their kids to public schools in the area.”

“They deserve a high quality of education too,” she said.

However, the tax could have a number of side effects on the college.

According to the 2023 Investments Annual Report, the college’s endowment, valued at $3.34 billion, made up 56 percent of the college’s operating budget in 2023, up from roughly 35 percent in 2003. This growth has made the college less reliant on tuition while also providing more money for scholarships and financial aid. A 2.5 percent tax could run the risk of the endowment spending more than it earns annually assuming it maintains current spending levels, leading to a shrunken endowment that can no longer support over half of the college’s budget and inducing cost-cutting measures across the college, the report said.

The endowment is invested in a diverse group of external funds, meaning the investment office does not have direct access to most of its assets. Instead, the endowment spends a small portion, usually ranging from 4 to 5 percent of the total endowment, on college operations. The majority of endowment gifts are restricted by donors, meaning the money has restrictions for specific uses. Most restricted funds are intended to support spending for scholarships, building improvements, faculty support, and general use by the college. Individuals generally donate to the college intending for their gifts to support the college itself and not public education in the state, according to the report.

“Amherst College uses income from the endowment to support the students, staff, and faculty of the college. Any reduction to that support will require us to make decisions that lead to either reductions in student aid, reductions in how we support our faculty and staff, or both,” said Associate Chief Communications Officer Lawrence Klutz.

Klutz said that the college has not yet “engaged in any planning” to consider the options if the endowment tax, still in its relative infancy, is passed. But he added that “in the event of the bill passing, it would be up to the college to determine how to cope with this significant reduction — likely through a combination of budget cuts, reduced financial aid, and other sources.”

Anderson’s fellow YDSA Co-Chair William Prince ’25 pushed back against the idea that the tax could reduce the college’s spending on financial aid. Prince asserted that he believes Amherst is committed to providing generous financial aid and thinks the college could draw from various other sources to pay the tax.

Anderson highlighted the fact that the college maintained its commitment to financial aid even in the midst of recent budget cuts. “There is nothing that would make me think that if we were to add extra pressure on the profit, they would minimize the amount of financial aid. I really think that’s the last place they would ever turn to make more money,” she said.

YDSA member Caden Stockwell ’25 agreed, saying, “I would hope that even if we weren’t spending as much money, financial aid would not be the first or second or third or fourth or fifth thing to go or that would be reduced at all.”

Anderson also questioned whether the tax would pose enough of a reduction to necessitate spending cuts. “I just truly don’t believe that there is a way in which this much money could not last into perpetuity,” she said.

Prince added that although Amherst, as a private institution, may not have a formal responsibility to provide for public education in the state, he thinks “taxation is a way to remedy that.” In reference to the gifts that the college grants to the town of Amherst, Prince said, “I think Amherst is very charitable, but I don’t think charity is the proper way to make sure that wealth is redistributed.”

“We wouldn’t be advocating for this if it wasn’t something that we believe was already in the character of the college,” Anderson said. “We are pushing for this because we believe that it is truly within the bounds of Amherst’s power to contribute to public good beyond campus.”