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House Republicans’ plan to raise taxes on university endowments could drive the biggest shift to endowments’ investment strategies in a generation. Under the new tax plan, universities might pull back from strategies that regularly generate short-term gains and shift money into other investments such as private equity, which generally don’t realize gains for years.
“This is a one-size-fits-all attempt to sort of come after some institutions, and there’s a lot of collateral damage,” said Andrew D. Martin, chancellor of Washington University in St. Louis. Martin said the university would likely either fall in the 7% or 14% tax rate under the plan, depending on its endowment’s performance. He estimated that could mean an additional $69 million or $160 million of tax liability annually beyond what it currently pays under the current 1.4% tax.
