LACs will avoid endowment tax

[Anonymous]

Anonymous wrote:

Anonymous wrote:

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Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:They also dropped the part that excluded international students from the calculation and lowered the rates to 1.4% between $500-750k per student, 4% between $750k-$2 million per student, and 8% over $2 million. A big nothing-burger for most institutions in the end.

Wow, people made such a big deal out of nothing. Life goes on.

For the schools subject to the tax, it’s a huge deal. This is a tax of several *billion* dollars for most of them.

Very few universities are being taxed a billion. The wealthiest LAC-Williams-only has $3.6bil

At my Williams reunion in June, the President told the alumni society that the tax could cost Williams as much as $40 million per year. That was really operating money for the college.

Williams chooses to finance an incredibly expensive all-grant program. The college could splurge on whatever it wanted if it got rid of that.

What program is this?

Financial aid

[Anonymous]

Anonymous wrote:

Anonymous wrote:Has the endowment tax change gone through?

Senate is currently voting on a version of the bill that has the exemption. It'll probably pass, as they want to protect Hillsdale.

Hillsdale will indeed be exempt, as will other rich LACs, such as Williams, Amherst, Bowdoin, Hamilton, Swarthmore, Pomona, Claremont McKenna, Carleton, Grinnell, Davidson, W&L, Wellesley and Bryn Mawr.

https://www.forbes.com/sites/emmawhitford/2025/07/05/these-26-rich-private-colleges-just-got-a-tax-cut-from-republicans/

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:They also dropped the part that excluded international students from the calculation and lowered the rates to 1.4% between $500-750k per student, 4% between $750k-$2 million per student, and 8% over $2 million. A big nothing-burger for most institutions in the end.

Wow, people made such a big deal out of nothing. Life goes on.

For the schools subject to the tax, it’s a huge deal. This is a tax of several *billion* dollars for most of them.

Very few universities are being taxed a billion. The wealthiest LAC-Williams-only has $3.6bil

At my Williams reunion in June, the President told the alumni society that the tax could cost Williams as much as $40 million per year. That was really operating money for the college.

Williams chooses to finance an incredibly expensive all-grant program. The college could splurge on whatever it wanted if it got rid of that.

Yeah, let’s go back to making college only for the rich. F*ck them poors, right?

[Anonymous]

^that was satire, if you didn’t notice

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:They also dropped the part that excluded international students from the calculation and lowered the rates to 1.4% between $500-750k per student, 4% between $750k-$2 million per student, and 8% over $2 million. A big nothing-burger for most institutions in the end.

Wow, people made such a big deal out of nothing. Life goes on.

For the schools subject to the tax, it’s a huge deal. This is a tax of several *billion* dollars for most of them.

No, it is not. An 8% tax on investment income (because it is not on the whole endowment, but on investment income only) is a billion dollars for exactly zero institutions. For Harvard it is maybe a bit over $300 million and it goes down quickly from there for other institutions. And that’s on an endowment over $50 billion and before they take steps to reduce their realized investment income. There are only four other institutions above the size threshold and in the 8% bracket.

I'm confused. Is the endowment tax a tax of AUM or on the income the endowment generates? I always thought is was the AUM.

[Anonymous]

My understand is it’s a tax on investment returns.

[Anonymous]

Smith is the only LAC affected, since its size is slightly over 3000.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:They also dropped the part that excluded international students from the calculation and lowered the rates to 1.4% between $500-750k per student, 4% between $750k-$2 million per student, and 8% over $2 million. A big nothing-burger for most institutions in the end.

Wow, people made such a big deal out of nothing. Life goes on.

For the schools subject to the tax, it’s a huge deal. This is a tax of several *billion* dollars for most of them.

No, it is not. An 8% tax on investment income (because it is not on the whole endowment, but on investment income only) is a billion dollars for exactly zero institutions. For Harvard it is maybe a bit over $300 million and it goes down quickly from there for other institutions. And that’s on an endowment over $50 billion and before they take steps to reduce their realized investment income. There are only four other institutions above the size threshold and in the 8% bracket.

I'm confused. Is the endowment tax a tax of AUM or on the income the endowment generates? I always thought is was the AUM.

It’s on net investment income of the university, which comes predominantly (though not exclusively) from the net investment income of the endowment. The endowment’s assets are only used to determine the tax rate thresholds (e.g., between $500k-$750k per student you get hit with a 1.4% rate, $750k-$2mm is a 4% rate, etc).

[Anonymous]

Anonymous wrote:Smith is the only LAC affected, since its size is slightly over 3000.

Wesleyan is well over 3000 and I’m sure there are others.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Smith is the only LAC affected, since its size is slightly over 3000.

Wesleyan is well over 3000 and I’m sure there are others.

Is Wesleyan's endowment per student over $500,000? If not, they aren't affected.

[Anonymous]

Which schools are affected?

[Anonymous]

It’s 3000 “tuition-paying” students, so I’m pretty sure Smith will fall under 3,000. With a little maneuvering, Dartmouth and Princeton could as well.

[Anonymous]

Anonymous wrote:Which schools are affected?

Princeton, Harvard, Yale, MIT, Stanford in the 8% bracket. Eight or so others (Notre Dame, Dartmouth, Rice, Richmond, WashU, Penn, Emory, Vanderbilt, plus Smith and Duke close to the thresholds) in the 4% bracket. Some of those are close to the thresholds so could rise or fall depending on how their endowments and enrollments go.

[Anonymous]

Anonymous wrote:It’s 3000 “tuition-paying” students, so I’m pretty sure Smith will fall under 3,000. With a little maneuvering, Dartmouth and Princeton could as well.

It’s full-time students plus part-time students calculated on a full-time student equivalent basis. Will be tough to game. I think Smith is still just under 3k though.

[Anonymous]

Anonymous wrote:

Anonymous wrote:It’s 3000 “tuition-paying” students, so I’m pretty sure Smith will fall under 3,000. With a little maneuvering, Dartmouth and Princeton could as well.

It’s full-time students plus part-time students calculated on a full-time student equivalent basis. Will be tough to game. I think Smith is still just under 3k though.

Ah, I see the part of the bill now that mentions tuition-paying. But then that’s defined as full time + part time equivalent later on. Good luck to the tax writers with this crappy language.