College Endowment Tax Hike
![[Post New]](/jforum/templates/default/images/icon_minipost_new.gif){kind=icon}
Anonymous
|
It looks like the tax for colleges with large endowments will be increased from 1.4% to 20%. While this may be a popular policy idea among the general public, I'm concerned that the actual outcome will be bad for college students that need financial aid. If Harvard is taxed at a rate of 20% of net investment income, they would owe around a billion dollars in endowment taxes each year (40k per student). The entire financial aid budget for Harvard is only around 800 million, so this tax would effectively eliminate Harvard's ability to offer financial assistance to low-income students.
https://www.politico.com/live-updates/2025/05/09/congress/republicans-eye-massive-expansion-of-college-endowment-tax-00339060 |
Anonymous
| Do the evangelical churces too, then. |
Anonymous
|
Looks like they are just looking to make sure these wealthy institutions pay their fair share.
This is definitely an issue that progressives and conservatives agree on. |
Anonymous
| How are we taxing the endowments but not the huge assets of rich people? Didn’t they argue it was impossible to have an assets tax? |
Anonymous
| If only this administration acted as much about making sure millionaires and billionaires paid their fair share. |
Anonymous
This part is not quite accurate. Undergraduates receive about $260 million of this, but almost all of it is absorbed through lower operating revenues (it is “net student income”) rather than through a specific distribution from the endowment. A higher tax would reduce the endowment’s distribution to the operating budget, but that could be absorbed through multiple channels. Given the earmarking of much of the endowment, those specific areas would have to absorb much of the hit (professorships, certain proframs, research, and, yes, some scholarships but more of the “named” variety than financial aid). And the freely usable part would probably hit staff as pay and benefits are half of the operating budget. |
Anonymous
| Ironically the way this is structured it benefits the high endowment public schools with a ton of students, UMich, UT, etc |
Anonymous
Maybe USNWR can add that to their methodology. People will absolutely lose it. |
Anonymous
| How many colleges will close with the extra tax? |
Anonymous
This would also hit SLACs hard. They make up about half of the schools above $1 million per student, depending on the year and which schools you include. And quite a few of the $750k-$1 million schools too. |
Anonymous
| Confused. Is this tax on the total of the endowment? Or just on its growth? |
Anonymous
On its income for the year. |
Anonymous
A lot of endowments are invested in illiquid assets which might not throw off that much income but increase in value which corresponds to an increased endowment. |
Anonymous
Sure as long as they throw in mega churches, evangelicals, country clubs and other tax evaders . |
Anonymous
Yes, but since they take distributions of 5 percent they have to take some capital gains, plus whatever distributions (dividends and interest) there are from their equity/fixed income/cash holdings and potentially hedge fund income tax liabilities from pass-through income. But I agree that this proposal would introduce a big tax planning and tax efficiency element to how endowments are managed. |