The Trump administration's education policy includes raising taxes on select private college endowments from 1.4 percent to between 4 and 8 percent. This new levy is designed to encourage colleges to utilize their substantial endowments to reduce educational costs for students. The tax formula divides the endowment size by the enrollment of non-international students, resulting in a higher tax for schools with greater per-pupil endowment. Republican rationale has shifted from promoting education affordability to holding elite institutions accountable for their endowments.
The goal of the new tax is pretty simple: It encourages colleges to use their major endowments to lower the cost of education.
The increased levies are pitched as a way to hold elite, woke universities and nonprofits accountable.
The provision raises the tax on earnings from select private college endowments from its current 1.4 percent rate to anywhere from 4 to 8 percent.
The higher the per-pupil endowment rate, the higher the tax, which creates an incentive structure encouraging colleges to spend more on financial aid.
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