Elite colleges with fat endowments are on the defensive as the GOP drags them into a D.C. tax fight

Craig F. Walker/Globe Staff
Harvard University has an endowment of more than $36 billion.

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WASHINGTON — America’s elite private colleges would rather talk about anything other than their own vast wealth, but Republicans have put the institutions they have long criticized as liberal bastions on the defensive by dragging them into Washington’s messy tax fight.

Tax overhauls drafted in the House and Senate have zeroed in on the billions of dollars that top private schools have tucked away in endowments. The lawmakers want to impose a new 1.4 percent tax on annual income spun off by these vast funds, limiting the tax to the approximately 60 schools where the endowments are worth more than $250,000 per full-time student.

That has thrust the nation’s most prestigious institutions of higher learning — including Harvard, Dartmouth, and a dozen other New England schools — squarely into an intense lobbying battle over money.


Playing out in the shadow of the noisier debate over corporate tax cuts, it pits Republicans against the colleges and universities that produce the type of highly educated voters and leaders who often oppose Republican policies. And it forces the colleges into the awkward position of publicly defending their enormous wealth at a time of rising student debt and soaring tuitions.

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Harvard leads the pack of total endowment with more than $36 billion, more than the entire gross domestic product of the state of Vermont. Princeton University has the top per-student endowment ratio, with more than $2.5 million for every full-time student. Even smaller schools in New England, such as Middlebury College and Bowdoin College, have endowments worth more than $1 billion.

Some of the schools “simply want to have a tax-free investment,” said Republican Representative Darrell Issa, who represents a swing district in southern California and supports taxing endowments.

“We can all talk about the poor kid who gets a scholarship, but sometimes this is about the professors and the people running the endowment and their salaries.”

Harvard president Drew Faust has pushed back against such characterizations, and in a recent statement said the tax is unnecessary because the school’s endowment “is not locked away in some chest” but “at work in the world.”


Harvard officials turned down a request to be interviewed for this story.

“Endowment proceeds fund nearly 40 percent of the university’s operations, with nearly a quarter spent directly on financial aid,” Faust said when the tax plan emerged last month. “A tax on university endowments is really a tax on the people who make up these institutions and the work they do: donors, alumni, staff, students, and faculty.’’

Though many of the wealthy schools remain tight-lipped about the Republican tax plan in public, some New England colleges are lobbying lawmakers behind the scenes as well as rallying their alumni.

Institutions used to being heard, such as Harvard, are at a disadvantage with this White House because, unlike past administrations, President Trump has largely shunned the school’s graduates for top posts. Most of the wealthiest schools in the country are also clustered in blue states on the coasts, where Trump saw little support during his 2016 campaign.

“These schools use endowments to build buildings, which employ our workers, and use it to subsidize student financial aid,” said Representative Michael Capuano, whose Cambridge district includes Harvard.


“If Harvard has a smaller endowment, they are less likely to build a building. And that hurts my construction industry, that hurts my financial services industry,” Capuano said.

Harvard’s endowment ‘is not locked away in some chest.’

Recently, even some Republicans have expressed reservations about the tax.

“Some of us who represent these colleges have some concern,” said Republican Representative Mark Walker of North Carolina. “Some of these schools are really struggling. You can’t just say, ‘Look at Harvard, they have all the money in the world.’ ”

But for conservative hard-liners, there will be no tears shed about increasing taxes on institutions that many believe socialize students to leftist values and are silos for the elite. Breitbart News, Fox News, and other conservative media outlets have often referred to Harvard as a “hedge fund with a university attached,” and have pressed lawmakers to tax the endowments.

The “taxpayer gravy train” to elite colleges “needs to end,” said Adam Andrzejewski, an open government activist who led a segment on Fox News this year.

In response, school administrators are telling supporters and lawmakers that the institutions use endowment funds to kickstart local economies and help low-income students with opportunities for economic advancement.

The president of Wellesley College, which would be taxed under the proposal, recently e-mailed all alumnae to denounce the provision. In the e-mail, president Paula A. Johnson said the tax would have a “damaging toll on Wellesley’s ability to sustain the financial aid policy that enables the College to enroll a socioeconomically diverse student body.”

Wellesley’s current total endowment, according to the school, is about $1.8 billion.

Smith College president Kathleen McCartney called the tax “deeply concerning.” The Northampton school has an endowment of roughly $1.75 billion.

“The bill would adversely affect colleges like Smith, whose missions are significantly supported by endowment income and whose students come from families spanning the income spectrum,” McCartney said in a statement. “Smith awards $65M annually in financial aid, much of it funded by the endowment, and there is no question this bill would negatively impact our access mission.”

The $250,000-per-student threshold would also include some smaller schools in New England, such as Wesleyan University in Connecticut and Colby College in Maine. Those institutions have endowments of about $700 million.

Massachusetts Senator Ed Markey’s office said it has been contacted by several schools, including Harvard, MIT, and Smith. Markey’s office also said it heard from schools that fall below the $250,000 threshold, because those institutions fear the tax would start a dangerous precedent.

Markey sent a letter to the Senate Committee on Finance last week urging it to reject the House’s proposal on endowments.

“I am greatly concerned that a tax on endowments will result in the availability of fewer dollars for scholarships, student services, research, and operating expenses at universities across the country, and particularly in Massachusetts,” Markey wrote to the Senate committee, in a letter provided to the Globe.

“At a time of rising higher education costs, Congress should not be taking from nonprofit education institutions,” Markey said.

Senate Republicans have included the endowment tax in their early blueprint of the tax overhaul bill, according to GOP leaders. It remains on the negotiating table, and the Senate Finance Committee has yet to release a text of its bill.

Senator Chuck Grassley, the former chair of the Senate Finance Committee and a senior member of the Republican caucus, has had endowment taxes in his sights for years. Although his office declined to comment on the current proposals, Grassley said in 2011 that colleges were “hoarding assets at taxpayer expense.”

Another complication: Perceptions of colleges and universities have become increasingly partisan in recent years.

A July poll by Pew Research Center found 58 percent of Republicans and Republican-leaning independents now feel that colleges and universities have had “a negative effect on the way things are going in the country.” This number is up 10 percentage points in the last year, and is now on par with other polarizing institutions such as labor unions, churches, and the national news media.

Astead W. Herndon can be reached at Follow him on Twitter @AsteadWesley