The Trump Administration will have four main weapons, one that will target wealthy private universities, the others that will affect all colleges and universities to varying degrees. They are (1) taxing endowments; (2) adding conditions to eligibility for federal funding; (3) investigating universities for Title VI and other civil rights violations (e.g., using race in employment decisions), with possible Justice Department action and loss of federal funding; and (4) changing accreditation standards. Some of (2) will be tied to (1), so I'll treat those together, although access to federally funded student loans and federal research funding is implicated under the others as well.
Targetting private, secular universities with large endowments
(1) Endowment Tax. The 2017 Trump tax cuts already introduced a tax of 1.4% on net investment income from endowments for schools with at least 500 tuition-paying students and assets valued at over $500,000 per student. This affected only about three dozen schools, although with more moving into that category every year. The two main lines of attack here would involve increasing the tax rate and/or expanding the number of schools affected by the tax. So, for example, Ohio Republican Representative David Joyce has introduced a bill that would raise the endowment tax to 10% while lowering the threshold for taxation to endowments valued at only $250,000 per student. (Georgia Republican Drew Ferguson proposed a bill excluding non-US citizens/permanent residents from the "per student" calculation!) Perhaps most notably Senator (soon to be Vice-President) J.D. Vance introduced a bill that increases the endowment tax to 35% for private, secular institutions with at least $10 billion (which conveniently exempts Notre Dame, the only non-secular private institution which is that rich).
And it gets worse: Senator Tom Cotton and a California Republican in the House have introduce the "Woke Endowment Security Tax" which imposes a one-time tax of 6% on the entire 2022 assessed value of endowments at secular, private institutions worth at least $12.2 billion. This kindly exempts the University of Chicago, but targets at least Harvard, Yale, Princeton, Stanford, MIT, Penn, Northwestern, Columbia, and Washington University in St. Louis (Sen. Cotton's office says it will also affect Cornell, but I'm not sure where those numbers are coming from). On this proposal, Yale would have to make a one-time payment of about $2.5 billion to the federal government. Even Yale would find that difficult to pay without a firesale of assets, I expect.
What is a certainty is that the endowment tax will go up, and it will probably be applied to more schools. For the super wealthy (like Harvard, Princeton, Yale, Stanford, MIT) this will have minimal effects; for the rich but less wealthy (like Northwestern, Chicago, Cornell, Johns Hopkins etc.) this will have tangible effects on budgets and perhaps academic programs. (In 2017, Congress also toyed with taxing educational benefits offered by universities to faculty and staff; that failed then, but I wouldn't be surprised if came back now.)
Recent Comments