WHILE THE TRUMP administration continues its high-profile war against Harvard University – cutting hundreds of millions of dollars in federal research funding, and threatening to challenge its accreditation and enrollment of international students – the administration quietly notched another win in its broader attack on higher education by including a steep increase in the tax on investment gains for wealthy universities in the massive tax and spending bill the president signed earlier this month.  

Harvard will be the hardest hit of any university, with the new endowment tax costing the school $266 million per year, according to an estimate by Phillip Levine, a Wellesley College economics professor who has tracked the issue. MIT is the only other Massachusetts university that will be hit by the new tax, with its annual tax increasing by an estimated $129 million.  

Universities, like all nonprofit organizations, long enjoyed tax-exempt status. However, a tax on university endowment gains was introduced in 2017 as part of the tax cut bill Trump championed during his first term. That legislation imposed a 1.4 percent tax on endowment gains of the wealthiest US universities – those that enrolled at least 500 full-time students and had an endowment greater than $500,000 per student.   

But that only whetted the appetite of congressional Republicans, who have been eager to boost the tax. That became possible with Trump’s return to the White House, backed by Republican control of both chambers of Congress. 

Republicans say it’s only fair that schools with enormous endowments are taxed on their investment gains. Those arguments have come, however, with more than a hint of the added animus toward higher ed shown by Trump, who has disparaged universities as the province of the “radical left,” and Vice President JD Vance, whose thinking was hardly subtle in a speech delivered four years ago to a national conservative group that was titled “The universities are the enemy.”  

In pushing the new tax increase, congressional Republicans have echoed that message. Rep. Jason Smith, chairman of the House Ways and Means Committee that produced one version of the big tax and spending bill, wrote that it “finally holds elite, woke universities and nonprofits accountable.” 

Those kinds of characterizations, say critics, telegraph the real motives behind the endowment tax. “We’re witnessing a political broadside, not sensible policymaking,” Levine wrote last week in the Chronicle of Higher Education.  

With an endowment of $53 billion, Harvard does not make for the most sympathetic victim.  

But the impact of the new tax, said Robert McCarron, president of the Association of Independent Colleges and Universities in Massachusetts, will be felt most acutely by students of more modest backgrounds and faculty members trying to better understand everything from the causes of disease to new approaches to cybersecurity. The new levy is “a tax on financial aid and a tax on research,” said McCarron, pointing out that endowment earnings are a major source of university spending in both areas.  

Harvard did not respond to a request for comment.  

In a statement issued last week, MIT provost Anantha Chandrakasan and treasurer Glen Shor said, “Like the other institutions affected by this tax hike, MIT has turned endowed gifts from generations of alumni and friends into a substantial charitable resource; we use the bulk of the income these endowed gifts generate to support financial aid, research, and education.”  

As Trump’s bill made its way through Congress, there were big swings in the endowment tax. One version had the rate maxing out at 21 percent before lawmakers settled on a top rate of 8 percent – still a more than five-fold increase from the rate that had been in place.  

The version enacted in the 2017 tax bill applied a 1.4 percent levy on all schools that met the tax threshold. The new version establishes three tiers. 

Schools with a per capita endowment – based on student enrollment – of $500,000 to $750,000 will pay 1.4 percent on investment gains. Those with a per capita endowment of $750,000 to $2 million will pay 4 percent. Finally, those with endowments greater than $2 million per student – a group that includes Harvard and MIT, along with Yale, Stanford, and Princeton – will pay 8 percent.  

The final version of the new endowment tax added an exemption for schools with fewer than 3,000 students, regardless of their endowment size. That change eliminated the endowment levy on four Massachusetts colleges – Amherst, Smith, Wellesley, and Williams – which had paid between $2.7 million and $3.7 million per year under the 2017 law.   

“So we actually, in essence, received a small benefit from this,” said Levine, the Wellesley economics professor, in an interview. But he said that was the result of maneuvering among Republicans to protect other schools. “I don’t think anyone was looking to give Wellesley, Williams, and Amherst a break,” said Levine. “I think we got swept in with other schools that were politically favored.” 

In his Chronicle of Higher Education essay, Levine said some of the recent criticism of US higher education is warranted. “To be sure, these institutions have some problems that need to be addressed,” he wrote. “Campus turmoil in response to events in the Middle East and a lack of politically diverse viewpoints are legitimate concerns.”  

But the funding attacks, through things like sweeping cuts to National Institutes of Health research grants and the endowment tax, he said, “will significantly hamstring the financial operations of these institutions without addressing any of the underlying issues.”  

These universities “provide a high-quality education to their students, who go on to become society’s leaders. They generate advances in science and technology that improve our economy and our health,” wrote Levine. “The financial hit they face will impose real costs on the people who work at these colleges, the students who attend them, the communities they are in, and our country as a whole. Does scoring a few political points warrant the infliction of such pain and the squandering of such opportunity for our nation? Evidently, this administration thinks so.”