US Senate targets elite universities with 8% endowment tax; Harvard may lose $200 million yearly

The US Senate Finance Committee has unveiled a proposal to lift the endowment tax on rich personal universities to eight %, a transfer that might value Harvard College an estimated $200 million yearly. The proposed laws, a part of President Donald Trump’s “One Large Stunning Invoice,” marks a dramatic enhance from the present 1.4 % tax charge enacted in 2017.Whereas the Home beforehand handed a model of the invoice with a 21 % tax charge, the Senate’s proposal continues to be a sixfold hike over the prevailing regulation. The revised charge would apply to establishments with endowments exceeding $750,000 per pupil, putting Harvard — with a $53.2 billion endowment and $2.9 million per pupil — within the high tax tier alongside eight different elite establishments.Elite universities face sweeping tax implicationsBased mostly on its most up-to-date monetary returns, Harvard earned $2.5 billion in fiscal 12 months 2024. Underneath the proposed 8 % tax, the College may owe roughly $200 million yearly. This monetary hit may deeply have an effect on Harvard’s operations, particularly as round 80 % of its endowment is restricted and can’t be freely reallocated.The proposal consists of safeguards to stop establishments from restructuring their investments to keep away from the tax. It directs Treasury Secretary Scott Bessent to situation rules focusing on tax avoidance preparations, notably these geared toward lowering taxable funding earnings.Based on The Harvard Crimson, Harvard officers have voiced sturdy opposition to the tax hike. College spokesperson Jason A. Newton acknowledged that “elevating the endowment tax would inflict hurt instantly on our college students and school – it might diminish our institutional capability to assist monetary assist and analysis, and it might impair our means to rent and retain college.”9 establishments anticipated to bear highest tax burdenAlong with Harvard, the very best tier of the proposed tax would impression Princeton, Yale, MIT, Stanford, Caltech, Juilliard, Amherst, and Pomona. Spiritual universities based after July 4, 1776, could be exempt from the raised tax charge.Senator James P. Lankford, a Republican from Oklahoma and a member of the Senate Finance Committee, advocated for decreasing the Home’s proposed charge to eight %, as reported by The Harvard Crimson. Regardless of the discount, the invoice’s passage may reshape the monetary panorama of elite greater schooling within the US.Harvard ramps up lobbying amid political momentumHarvard spent $230,000 on federal lobbying within the first quarter of 2025 — its highest since 2008 — on points together with endowment taxation, pupil visas, and analysis funding. College President Alan M. Garber beforehand warned college that the tax menace is “the menace that retains me up at evening,” in accordance with The Harvard Crimson.The present proposal follows growing Republican momentum to focus on elite universities financially. With the 2017 tax regulation set to run out quickly and Republicans holding each Congress and the White Home, the tax enhance had been broadly anticipated.