Endowment Tax Fairness Act

This bill raises a special tax on the investment income of very wealthy private colleges and universities. Today, these schools pay 1.4% on money they earn from their endowments. The bill would raise that rate to 21%. The money collected would go into the U.S. Treasury to help lower the federal deficit and, after that, the national debt.

It applies only to private colleges and universities that are quite large and wealthy: those with at least 500 tuition-paying students (most of whom are in the United States) and endowments worth at least $500,000 per student. The higher tax would start for school tax years that begin after the bill becomes law.

Key points

• Who is affected: Private colleges/universities with big endowments and at least 500 students, mostly in the U.S.
• What changes: The tax on endowment investment income jumps from 1.4% to 21%
• Where the money goes: To the federal government’s general fund to reduce the deficit and then the national debt
• When it starts: For taxable years beginning after the bill is enacted