I missed an IHE piece on May 19, in which a Smith College professor makes the case for Massachusetts taxing Harvard’s endowment, as some politicians are suggesting.

His argument is that since states tax businesses, there isn’t any reason not to tax universities too.

It’s not a good argument. First, businesses don’t actually pay taxes. Only people pay taxes. Business taxes are just a means by which politicians extract resources while deceiving people as to where they’re coming from.

That leads to my second point. Harvard may do some questionable things with the resources voluntarily given to it, but the state will unquestionably make bad use of additional resources it confiscates. Governments in the United States, starting with the behemoth in Washington and on down, do far too much already and feeding them more will only make the politicians want yet more money.

This is the same problem as with tuition subsidies. When government subsidizes tuition, college officials know they can charge more, and do, which then leads to more subsidies. With government, increased taxes leads the politicians to find additional programs and projects they want to fund (to increase their re-election chances) and after all that money is blown, they’ll still complain about “revenue shortfalls” and look for new ways of extracting money, such as taxing endowments.