This morning the GOP released their long-awaited tax reform legislation. While the 429-page bill includes a complete overhaul of both individual and corporate tax policy, there are several key changes that could have long-lasting ramifications for higher education’s future.
Chief among these is the GOP proposal to tax earnings on large endowments for schools with at least 500 students. Similar ideas have been floated before, often with the goal of strong-arming schools into spending their endowment earnings giving out additional aid to high-need students, an element not included in the GOP proposal. Still, the idea will certainly prove controversial among schools, many of whom are increasingly struggling financially. However, the proposal only applies to institutions with at least 500 students and an endowment of at least $100,000 per student. As such, it appears that the changes would mainly affect a handful of the most prosperous institutions: by our rough estimate, about 150 schools would be affected.
The school’s endowments range in size from $83 million at Charles Drew University of Medicine and Science, to $37 billion at Harvard. That translates to about $1.3 million per student at Harvard, putting them five spots behind Princeton University whose endowment is valued at $22.3 billion or $2.7 million per student. At the low end, Johnson University barely squeaks through: their endowment is valued at $117 million, which translates to just $100,329 per student. There are also several public flagships that meet these criteria, though the proposal explicitly refers to private universities and would therefore not affect these schools in its current form.
Edit: House Ways and Means Chairman Kevin Brady introduced an amendment to the bill that would change the taxation threshold from endowments of $100,000 per student to $250,000 per student. This map has above has been updated to show these schools in orange, while all schools that met the original criteria are shown in blue.