The US Senate Finance Committee has unveiled a proposal to raise the endowment tax on wealthy private universities to 8 percent, a move that could cost Harvard University an estimated $200 million annually. The proposed legislation, part of President Donald Trump’s “One Big Beautiful Bill,” marks a dramatic increase from the current 1.4 percent tax rate enacted in 2017.While the House previously passed a version of the bill with a 21 percent tax rate, the Senate’s proposal is still a sixfold hike over the existing law. The revised rate would apply to institutions with endowments exceeding $750,000 per student, placing Harvard — with a $53.2 billion endowment and $2.9 million per student — in the top tax tier alongside eight other elite institutions.Elite universities face sweeping tax implicationsBased on its most recent financial returns, Harvard earned $2.5 billion in fiscal year 2024. Under the proposed 8 percent tax, the University could owe roughly $200 million annually. This financial hit could deeply affect Harvard’s operations, especially as around 80 percent of its endowment is restricted and cannot be freely reallocated.The proposal includes safeguards to prevent institutions from restructuring their investments to avoid the tax. It directs Treasury Secretary Scott Bessent to issue regulations targeting tax avoidance arrangements, particularly those aimed at reducing taxable investment income.According to The Harvard Crimson, Harvard officials have voiced strong opposition to the tax hike. University spokesperson Jason A. Newton stated that “raising the endowment tax would inflict harm directly on our students and faculty – it would diminish our institutional capacity to support financial aid and research, and it would impair our ability to hire and retain faculty.”Nine institutions expected to bear highest tax burdenIn addition to Harvard, the highest tier of the proposed tax would impact Princeton, Yale, MIT, Stanford, Caltech, Juilliard, Amherst, and Pomona. Religious universities founded after July 4, 1776, would be exempt from the raised tax rate.Senator James P. Lankford, a Republican from Oklahoma and a member of the Senate Finance Committee, advocated for lowering the House’s proposed rate to 8 percent, as reported by The Harvard Crimson. Despite the reduction, the bill’s passage could reshape the financial landscape of elite higher education in the US.Harvard ramps up lobbying amid political momentumHarvard spent $230,000 on federal lobbying in the first quarter of 2025 — its highest since 2008 — on issues including endowment taxation, student visas, and research funding. University President Alan M. Garber previously warned faculty that the tax threat is “the threat that keeps me up at night,” according to The Harvard Crimson.The current proposal follows increasing Republican momentum to target elite universities financially. With the 2017 tax law set to expire soon and Republicans holding both Congress and the White House, the tax increase had been widely anticipated.
