The House Ways and Means proposal would impose a graduated endowment tax. Institutions with endowments of $500,000 to $750,000 per student would still pay the 1.4 percent tax. As the size of the endowment grows, however, the investment income would be taxed at 7 percent, 14 percent, or as high as 21 percent for schools with endowments of at least $2 million per student.
What does that mean in real dollars? Wellesley College economics professor Phillip Levine, in a spreadsheet shared with the editorial board, calculated that nine schools would hit the top tax rate - including, in New England, Harvard University, Yale University, Massachusetts Institute of Technology, and Amherst College. Harvard, Yale, Stanford, Princeton, and MIT would each owe more than $410 million in taxes a year, with Harvard topping the list at $849 million.
The original endowment tax was modest enough that colleges could incorporate it into their budgets. The proposed tax hike would almost certainly require institutional cuts.
It's true that Harvard has a lot of money. There are legitimate disagreements over how much an elite institution like Harvard, which like other nonprofits is tax-exempt, should pay in taxes. But there's a reason Harvard is Harvard - a school that does groundbreaking research while training the next generation of leaders and entrepreneurs. That reason is money: Harvard has resources to invest in students, research, facilities, and technology. Harvard reported a $6.5 billion operating budget in fiscal 2024, of which $2.4 billion came from distributions from its $53.2 billion endowment. While Harvard's sticker price is a high $86,926, Harvard also offers enough financial aid that any student with family income below $200,000 can attend for free.
"The problem is you're taking the preeminent educational institution in the US and probably the world, which gets that way because they have the resources to be able to finance everything they do, and now you're undercutting that," Levine said. "That has significant losses not just for the Boston economy but for the country as a whole."