Amid the rising challenges universities face from the Trump Administration, Rep. Troy E. Nehls (R-Texas) introduced the Endowment Tax Fairness Act, a bill that would raise the excise tax levied on certain private university endowment profits from 1.4% to 21% Jan. 15.
The proposal is one of a few, including another from the U.S. Rep. Mike Lawler (R-N.Y.), which suggests the endowment tax should be raised to 10%.
The increased endowment tax would hold universities with “massive” endowments to the same standard as corporations and help to combat the rise in tuition that is over-proportional to the average annual inflation rate, according to Nehls’ statement introducing the bill.
Currently, Northwestern has the 16th largest endowment, according to the National Center for Educational Statistics. The 2024 NU endowment report declared an endowment of $14.3 billion as of Aug. 31, 2024.
NU’s Young America’s Foundation President Caleb Nunes said he believes the response to the proposed endowment tax increase is an overreaction, especially from the left, because he said the legislation is inherently a left-wing policy.
“Universities have operated as tax-exempt corps, accruing wealth while simultaneously jacking up tuition prices, screwing over the American people and leaving them with six figures of debt,” Nunes said.
Ultimately, researchers and recipients of financial aid will be impacted the most by such a tax increase, which is why Nunes said he doesn’t support it.
The National Association of College and University Business Officers is opposed to the tax increase for similar reasons. An increased endowment tax would divert resources away from “schools’ missions of teaching, research, and public service,” according to NACUBO Vice President of Policy and Research Liz Clark.
“College Board research shows that, as of 2023-24, grant aid provided by colleges and universities themselves constitutes over half (52%) of all undergraduate grant aid, a trend that began in 2020-21,” Clark said in an email to The Daily. “Magnifying the current tax would only serve to limit this progress as those student aid resources would not be available without charitable giving and endowments.”
NU announced a series of interventions to protect the University against the rapidly evolving federal directives Feb. 12.
The first change is that all personnel actions, including “hiring, compensation increases, additional payments and other related actions” will be analyzed to ensure they are truly necessary to the operation of the University and the pursuit of its dual mission of teaching and research. It noted that previously approved faculty firing will not be affected, but open positions, including ones that have already been posted, are subject to review.
Additionally, NU plans to limit current spending by reducing non-personnel expense budgets in the current fiscal year by 10% and require expenditures or financial commitments greater than $25,000 to be pre-approved by the vice president and chief financial officer.
The announcement emphasized the uncertainty of federal legislation and NU’s commitment to higher education.
Nunes said he believes the Trump Administration wants to “punish” universities, which they see as institutions of the cultural left, for their anti-Trump policies and rhetoric. He said the only possible utility would be to obtain concessions from Universities and force them to “stop discriminating against whites and Asians.”
“That said, universities will respond to an endowment tax not by cutting superfluous jobs or departments, but instead take it out on the American people in the form of reduced financial aid and higher tuition,” Nunes said.
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