Private Colleges With Massive Endowments Face Tax Hike Under Republican Plan

A proposal seeks to raise the tax from the current 1.4 percent to as high as 21 percent. MIT said it ‘would seriously damage’ its ‘ability to conduct research.’

Water flows down the Charles River near Harvard University in Cambridge, Mass., on April 15, 2025. Charles Krupa/AP Photo

House Republicans are proposing a sharp increase to the excise tax on investment income earned by the nation’s wealthiest colleges and universities.

On Monday, the Republican-led House Ways and Means Committee released the full text of the long-awaited tax and spending bill. The legislation would, among many other things, raise the tax on private institutions’ endowment income from the current 1.4 percent to as high as 21 percent, aligning it with the corporate tax rate.

That 1.4 percent tax was established under the 2017 Tax Cuts and Jobs Act, commonly referred to as the Trump tax cuts. It applies to private colleges and universities with endowment assets exceeding $500,000 per full-time student.

If enacted as is, the bill would implement a tiered tax structure based on the size of a university’s endowment relative to its student population. It still uses the same $500,000 per-student threshold for the original 1.4 percent endowment tax. From there, the rate would climb to 7 percent for colleges with endowments valued at $750,000 to $1.25 million per student, and to 14 percent for those between $1.25 million and $2 million.

The highest rate is reserved for institutions with endowments exceeding $2 million per student. Some of the nation’s most prestigious schools, including Harvard, Yale, Princeton, Stanford, and the Massachusetts Institute of Technology (MIT), would fall into the 21 percent bracket.

The bill notably includes a new provision that was not in a draft version released earlier this month. It would exclude international students from colleges’ enrollment counts when calculating per-student endowment levels, effectively subjecting institutions with large international student populations, such as Columbia University, to higher tax brackets despite their high overall enrollment numbers.

The bill also provides an exemption for religious institutions, shielding schools such as the University of Notre Dame from the increased levy.

The committee’s chairman, Rep. Jason Smith (R-Mo.), said the changes would do away with what he described as unjustified privileges for elite institutions.

“Under the economic policies of President Biden and Washington Democrats, the wealthy and well-connected benefitted from taxpayer handouts,” Smith said in a statement, adding that the bill “ends special interest giveaways” and will hold accountable the elite and entities that “benefit from the tax code.”

MIT warned that the proposed tax framework would have serious consequences for its research.

“A tax of this magnitude would seriously damage our ability to conduct research that strengthens our nation’s security and economic competitiveness,” a spokesperson for MIT told The Epoch Times, noting that MIT’s educational endowment and other investments support more than 40 percent of the school’s annual campus budget.

“It’s basically a tax on national research and student aid, and at MIT alone, it would cut hundreds of millions of dollars from our budget each year.”

The proposed tax hike would add to financial pressures stemming from recent cuts to federal research funding. Harvard, for instance, has already had approximately $2.2 billion in federal grants blocked amid escalating tensions with the Trump administration over its handling of campus anti-Semitism and alleged ideological bias.

On Tuesday, the administration announced it would revoke an additional $450 million in federal grants to the university. The departments of Education and Health and Human Services, along with the General Services Administration, cited Harvard’s response to anti-Semitic incidents on campus as a central reason for the move. The decision was also linked to accusations that the Harvard Law Review, a student-run publication, discriminated against white applicants in its selections of articles and editorial members.

Despite having the largest university endowment in the country, currently valued at $53 billion, Harvard heavily depends on federal funding for its expansive research enterprise. In response to mounting financial uncertainty, the university has announced plans to borrow $750 million from Wall Street lenders.