H.R.446 - Endowment Tax Fairness Act (119th Congress)
Summary
H.R. 446, the Endowment Tax Fairness Act, proposes to amend the Internal Revenue Code of 1986 by increasing the excise tax rate on the investment income of private colleges and universities from 1.4% to 21%. The bill specifies that the increased revenue will be used to reduce the national deficit and, subsequently, the national debt. The bill was introduced in the House of Representatives on January 15, 2025, and referred to the Committee on Ways and Means.
Expected Effects
If enacted, the bill would significantly increase the tax burden on private colleges and universities with substantial endowments. This could lead to changes in how these institutions manage their finances, potentially affecting tuition, financial aid, and investment strategies. The increased tax revenue would contribute to federal debt reduction.
Potential Benefits
- Debt Reduction: The primary stated benefit is the reduction of the national deficit and debt.
- Potential for Increased Federal Revenue: A higher tax rate on endowments could generate more revenue for the government.
- Fairness Argument: Proponents might argue that it promotes tax fairness by increasing the contribution of wealthy institutions to the national treasury.
Most Benefited Areas:
Potential Disadvantages
- Impact on Educational Institutions: Increased taxes could reduce the funds available for scholarships, research, and other educational programs.
- Potential for Tuition Increases: Colleges and universities might raise tuition to offset the increased tax burden, potentially impacting students and families.
- Reduced Investment: Institutions may reduce investment in innovative projects or infrastructure improvements.
- Economic Impact on Local Communities: Reduced spending by universities could negatively affect local economies that rely on university-related activities.
Most Disadvantaged Areas:
Constitutional Alignment
The bill appears to align with the Constitution's Article I, Section 8, which grants Congress the power to lay and collect taxes, duties, imposts, and excises to pay the debts and provide for the common defense and general welfare of the United States. The bill's purpose of reducing the national debt falls under this broad authority. However, the specific application of the tax and its potential impact on educational institutions could raise questions about fairness and equity, though not necessarily constitutional violations.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).