Harvard, MIT face steep tax hike under Trump bill

July 17, 2025

By Michael Jonas

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 Peter 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, have long enjoyed tax-exempt status. A tax on university endowment gains was first 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,” or 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.”

More Context

• Mass. ‘eds and meds’ sector in the cross hairs (February 2025) 
• How Harvard could become a higher ed hero (March 2022)