Comment by huac
9 years ago
There are plenty of analogous policies in America. For example, universities are required to spend 10% (or some other percent?) of their total endowment each year in order to keep their tax-free status. This is why Harvard & Co. need to continue fundraising each year despite their massive endowments - they're massively discouraged from just 'saving' as well.
Everything distorts markets. The question is how to distort markets into providing the best outcome.
Other non-profit entities (such as private foundations) are required to spend a certain fraction of their money each year or pay taxes. Universities are exempted from that requirement.
from [0]: "Harvard targets an annual endowment payout rate of 5.0 to 5.5 percent of market value. The University's actual payout rate has fluctuated over the past 10 years, from a low of 4.2 percent in fiscal year 2006 to a high of 6.1 percent in fiscal year 2010."
[0] https://www.harvard.edu/about-harvard/harvard-glance/endowme...
[1] https://www.irs.gov/charities-non-profits/private-foundation...
Woah, I did not know that universities were exempt! The head of my alma mater's investment fund definitely did not mention that...