Colleges and universities will likely face an increase in taxes on their endowments after Republicans’ “Big, Beautiful Bill” passed the House and is now headed to the Senate.
While some reports indicate administrators have hired lobbyists to try and water down the proposal, observers say some sort of tax hike is likely in the offing for these institutions.
Rather than a flat rate, House Republicans seek to increase taxes on private university endowments ranging from 1.4 percent to 21 percent, according to the legislation.
The law would hold “woke, elite universities that operate more like major corporations … accountable, ensuring they can no longer abuse generous benefits provided through the tax code,” states a report from Republicans on the House Ways and Means Committee.
The tax “would be tiered depending on the size of the school’s endowment and enrollment, with a top rate of 21 percent for those with endowments of at least $2 million per student,” the New York Times reported.
Endowments valued at $750,000 or less per student would be taxed at the current 1.4 percent rate, while endowments valued between $750,000 and $1.25 million per student would be taxed at a 7 percent rate, endowments between $1.25 million to $2 million would be taxed at 14 percent, and those about the $2 million threshold would be taxed at 21 percent.
“[S]everal institutions with large endowments — Harvard, Yale, Stanford, and Princeton Universities and the Massachusetts Institute of Technology — would now face significantly larger tax bills, ranging from $400 million to $850 million per year,” according to calculations published recently in the Chronicle of Higher Education.
House Ways and Means Committee Chairman Rep. Jason Smith, R-Mo., praised the plan on X: “For too long, universities have received beneficial treatment from our tax code while disregarding the interests of taxpayers.”
But not all policy experts think tax hikes are a good thing.
Neil McCluskey with the libertarian CATO Institute told The College Fix in a recent telephone interview that the U.S. government should not be in the habit of raising taxes, and what’s more, the bill treats universities differently from other groups in this country.
“[This bill] is aimed at only elite institutions,” he said, pointing out Republicans do not like them.
In a piece McCluskey wrote for CATO on May 20, he added “the tax system should never be used to punish people based on their political opinions. But that is clearly what House Republicans are doing when they identify the targets of their tax as ‘woke.’”
Pomona College’s Vice President Jonathan Williams told the New York Times that the tax hike will be shouldered by tuition hikes: “This will shift the cost of tuition squarely on to families.”
But conservative Washington D.C. analyst Peter Roff said taxing the endowments is fair game, pointing out the U.S. taxpayer has already been subsidizing higher education for years now.
“The hectoring, lecturing, pinheaded elites at all the so-called finer schools who have spent years staring down their pointy beaks at the rest of us while getting fat and academically lazy, sitting on billion-dollar endowments, are about to get a long overdue comeuppance,” he told The College Fix in an email.
These institutions should be taxed like big businesses now, he said, adding he believes they “eventually will be.”
“If not this year, then sometime in the future,” he said.
As The College Fix previously reported, in 2024 high-profile Republicans were already pushing to tax universities’ endowments, arguing the institutions don’t deserve their tax-exempt statuses because they use their vast amounts of money to push “woke” biases.
In fact, then Ohio Sen. JD Vance had proposed the College Endowment Accountability Act. It appears that, as vice president, he has pushed his concept closer to reality.
MORE: GOP lawmakers try to tax ‘woke’ private universities’ massive endowments
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