Fact Check: The tax rate on endowment income for private colleges can reach 8%.

Fact Check: "The tax rate on endowment income for private colleges can reach 8%."

What We Know

The claim that the tax rate on endowment income for private colleges can reach 8% is supported by recent legislative proposals. According to a report by the Senate Finance Committee, the proposed tax rate on endowment earnings for private colleges and universities would be tiered, with the highest rate reaching 8% for institutions that have an endowment of at least $2 million per student. This proposal contrasts with a previous plan from the House of Representatives, which suggested a much higher tax rate of 21% for similar institutions. Currently, private colleges are subject to a flat tax rate of 1.4% on their endowment earnings, a rate established by the Tax Cuts and Jobs Act in 2017 (Commonfund).

Analysis

The evidence supporting the claim comes from credible sources, including the Senate Finance Committee's official proposal and analyses by reputable news outlets. The Forbes article details the Senate's proposed tax structure, which specifies that institutions with a per-student endowment of $2 million or more would incur an 8% tax rate on their endowment earnings. This tiered structure is designed to increase the tax burden on wealthier institutions while maintaining lower rates for those with smaller endowments.

The reliability of these sources is high, as they originate from official legislative discussions and established news organizations. The Senate Finance Committee's proposals are part of the legislative process, making them authoritative in this context. Furthermore, the Canada Revenue Agency provides a framework for understanding how taxes, including those on endowments, are administered, although it primarily focuses on Canadian tax law.

However, it is important to note that while the Senate's proposal suggests an 8% tax rate, this is still a proposal and has not yet been enacted into law. Legislative processes can be complex, and the final tax rate may differ from what is currently proposed.

Conclusion

The claim that "the tax rate on endowment income for private colleges can reach 8%" is True. The evidence from legislative proposals indicates that the Senate has indeed proposed an 8% tax rate for certain private colleges with substantial endowments. This reflects a significant increase from the current rate of 1.4%, aligning with the claim made.

Fact Check: The tax rate on endowment income for private colleges can reach 8%.