GOP Tax Proposal Targets Major Hikes in Elite University Endowment Funds
Republican lawmakers from the House have suggested substantial increases in taxes for America’s richest higher education institutions as part of a new legislation unveiled on Monday aimed at prolonging President Trump’s 2017 tax reductions.
According to the proposed plan, private higher education institutions housing over 500 students and boasting endowments exceeding $2 million per student would be subject to a heightened tax rate of 21% on their net investment earnings — significantly up from the present rate of 1.4%.
The institutions affected might encompass Harvard, Princeton, Yale, MIT, and Stanford, as per the data for 2024. NACUBO-Commonfund Study of Endowments .
Meanwhile, colleges with endowments between $750,000 to $1.25 million per pupil will pay a tax of 7 percent. Colleges with endowments between $1.25 million and $2 million per student would pay 14 percent.
The suggested strategy emerges as part of an intense dispute between the Trump administration and multiple leading universities.
The Trump administration is reviewing $9 billion in federal funding to Harvard and has already frozen at least $2.2 billion in grants and $60 million in contracts after the university rejected the White House antisemitism task force’s demands, which included screening international students to prevent the admission of antisemitic activists or terrorist sympathizers.
The Trump administration then said the university would no longer receive new federal research grants until it meets the task force’s demands to crack down on campus antisemitism and to retreat from its racially biased policies on diversity, equity, and inclusion.
As a result, Harvard charged the government with attempting to "assert unprecedented and inappropriate authority" over the institution's management.
"Today’s correspondence includes new threats to unlawfully withhold funds designated for critical research and innovation as punishment because Harvard filed its lawsuit on April 21," according to previous statements from a university spokesperson. National Review .
“Harvard will continue to comply with the law, promote and encourage respect for viewpoint diversity, and combat antisemitism in our community. Harvard will also continue to defend against illegal government overreach aimed at stifling research and innovation that make Americans safer and more secure.”
Earlier this month, Trump threatened to rescind Harvard's tax-exempt status as well. However, the university maintained that the president lacks "any legal foundation" for such an action.
The administration similarly paused dozens of federal grants to Princeton, canceled $400 million in grants and contracts to Columbia University, and suspended about $175 million in federal funding to the University of Pennsylvania.
The Trump administration stated that it terminated financial support for UPenn due to the institution's decision to permit males to participate in women's athletic events.
In the meantime, the House GOP legislation, unveiled by the House Ways and Means Committee on Monday, seeks to cut taxes by over $4 trillion and decrease expenditures by a minimum of $1.5 trillion within ten years.
Trump’s so-called “One, Big, Beautiful Bill” would renew many of the president’s first-term tax cuts that are set to expire at year’s end, including a permanent extension on the 37 percent top rate for individuals.
Although the proposal suggests raising the state and local tax deduction to $30,000 for both single filers and married couples, up from the present cap of $10,000, Politico indicates that the SALT plan has not been finalized yet, and the Ways and Means Committee plans to utilize placeholder language during the markup of the bill scheduled for Tuesday. Legislators from regions with higher taxes are advocating for a more substantial deduction; they've suggested an amount as high as $124,000 for those filing jointly.
The draft similarly fulfills Trump’s campaign pledge to abolish income taxes on tips and overtime pay until 2028.
House Speaker Mike Johnson informed journalists that the House might approve the legislation by Memorial Day, following which it would move to the Senate where it could undergo substantial amendments.
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