The House committee reportedly plans to announce changes next week that will raise interest rates and include more universities, which is the way the House and the committee’s efforts are underway.
Education leaders are worried about the increase in the pace over the months. Now, the Republican-led committee is expected to propose a boost to the donation tax excise tax from 1.4% to 21%, depending on the donation value of each student, Punchbowl News,,,,, politics and other media reports.
The proposed donation tax applies only to current private institutions.
According to the proposed formula, each student’s donation to $750,000 to $1.25 million will be reported to be subject to a 7% excise tax. That figure will raise donations to universities to 14%, worth $12,500 to $2 million. The highest level of colleges, each student’s end-taid is $2 million or more, will pay 21%. (Currently, students with an end-number university valued at $500,000 or more pay 1.4% tax.)
Details of the increase in taxes are not final and may be transferred at the committee’s hearing Tuesday.
Republicans are preparing to increase their donation taxes as part of a broader effort Reconciliation with cutting billions of dollars in spending and paying for President Donald Trump’s priorities. Other House committees have published their proposed settlement layoffs, including a plan to disrupt the student loan system, but the way and means of the bill are crucial to the process.
Republicans’ motivation for increasing taxes seems to be dual, as it will help with tax cuts and become a punitive measure for colleges they think “wake up”. In 2023, a total of 56 universities paid about $380 million in donation tax.
“Seven years ago, Trump’s tax cuts sparked an economic boom and provided relief for working families,” said Jason Smith, chairman of the Missouri Republican Committee. “The family-family, pro-labor-managed tax rules are at the heart of President Trump’s economic agenda, which puts working families ahead of Washington and will create jobs, increase wages and investments, and help usher in a new golden age of prosperity. The way and means Republicans have been preparing for this moment for two years and we will serve the American people.”
The proposal proposes a full-scale presidential attack on higher education that has allowed the federal government to cut research funding, hunt down universities for suspected anti-Semitism, target diversity, equity and inclusion programs, and attempt to expel international students.
Due to 1.4% The end-leverage excise tax was in 2017 in Trump’s first higher education leader long feared that the president would raise taxes during his second term.
The potential increase in donation taxes has been a key issue as colleges increase their lobbying efforts in early Trump 2.0. Recent lobbying reports show that Harvard has the largest endowment fund, worth more than $53 billion recently, has imposed the issue on Congress. (Northwest Chief Investment Officer said last week that the potential increase would be “destructive”.)
Smaller institutions, some of whom never hired federal lobbyists by 2025, have also raised concerns that expanding the donation tax will harm their educational mission.
Only three universities will pay the highest tax rates at 21% – Princeton, Yale and Massachusetts Institute of Technology, according to current director of career pathways and policy for college reforms. Another 10 universities, including Harvard, will be hit by a 14% rate.
An analysis published last month by investment firm Hirtle Callaghan pointed out that the recent proposed changes to donation excise tax “will greatly expand the universe of paying taxes from large, affluent institutions to smaller, regional taxes.” The analysis warns that this increase “has threatened to cause irreparable damage to the economic damage of many schools that are economically weaker than schools that pay current taxes.”
Several higher education associations have previously expressed opposition to the increase.
Last fall, U.S. Board of Education Chairman Ted Mitchell sent a letter to Congress, signed by 19 other associations calling for the abolition of the existing donation tax, and believed that “this tax would undermine teaching and research tasks at affected institutions without reducing university costs, enhancing university costs, strengthening student litigation or responding to student inde weakness.”
