House Republicans are proposing to dramatically raise taxes on elite universities’ massive endowment profits as part of President Donald Trump’s “one big, beautiful bill.”
The House Ways and Means Committee’s tax bill released Monday afternoon would target universities’ endowments through a tiered-approach based on institutions’ endowment per student ratio. Raising the tax on certain universities’ endowment investment returns is expected to produce tens of billions of dollars in revenue over a ten-year period, which GOP lawmakers are hoping will help offset the cost of the president’s tax priorities.
An endowment is a compilation of donated assets invested by a university to permanently fund its mission. Congressional Republicans are seeking to impose a tax hike on universities’ endowment profits in part due to campuses failing to crack down on antisemitism and inculcating left-wing ideology among students.
Colleges with endowments valued between $500,000 and $750,000 per student would pay the current 1.4% tax on annual investment income, according to the committee bill text. Endowments valued under $1.25 million per student would be taxed at a 7% rate and those with endowments between $1.25 million to $2 million per student would pay a 14% rate.
Universities with endowments valued at more than $2 million per student would pay a 21% tax on annual endowment profits. Republican Texas Rep. Troy Nehls’ Endowment Tax Fairness Act floated a 21% tax on universities’ investment income whose endowments are valued at $500,000 per student or greater.
“I’m pleased the primary provisions of my bill, the Endowment Tax Fairness Act, are included in the House Ways and Means reconciliation proposal,” Nehls told the Daily Caller News Foundation. “I am proud to have led this effort and applaud Chairman Smith’s hard work and leadership. Every day, we are one step closer to delivering President Trump’s one big, beautiful bill. Let’s get it done and do some good for the American people.”
Princeton University, Yale University, Stanford University, Massachusetts Institute of Technology and Harvard University had endowment per student ratios above $2 million in fiscal year 2022, according to the higher education-focused outlet, Inside Higher Ed.
These five universities would likely be subject to a 21% rate on annual investment income if the provision passes Congress and is signed into law by Trump.
The tax-writing committee is scheduled to markup the bill beginning Tuesday afternoon.
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