A new tax on endowment earnings is intended to inflict ¡°pain¡± on elite US universities and may be harder to fight than other policies being pursued by the Trump regime, according to experts.

With attention focused on international student bans and cuts to federal funding, Republican lawmakers in the House of Representatives succeeded in narrowly passing a tax and spending bill last week, opening up?a new battleline against a higher education sector?that faces threats on various fronts.

It proposes increasing the tax that the wealthiest institutions pay on the investment returns of their endowments. Those with a total endowment of more than $500,000 (?371,000) per student currently face a 1.4 per cent tax but, as part of Donald Trump¡¯s ¡°big, beautiful bill¡±, this tax rate would increase fifteenfold to 21 per cent for private colleges with an endowment of $2 million or more per student.

¡°The threat posed is substantial to the institutions affected,¡± Phillip Levine, professor of economics at Wellesley College told?Times Higher Education.

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¡°These taxes could represent 10 to 20 per cent of the operating budgets of the institutions in the top tax tiers. It would require them to institute large spending cuts that would likely affect many aspects of what they do, including the availability of financial aid.¡±

The new policy will only affect about 35 colleges, according to David H. Feldman, professor of economics at William and Mary, but these are the types of institution the Trump administration ¡°wants to punish for political reasons¡±.

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The policy will inject uncertainty into their budget planning, force them to cut financial aid spending and capital projects to preserve resources for the operating budget, he warned.

¡°This is a lot of budget cutting, but that¡¯s exactly what the administration wants to see¡­pain on ¡®rich¡¯ college campuses.¡±

The bill needs just a simple majority vote in favour to pass in the Republican-controlled Senate, but the party will face intense lobbying to remove this tax proposal, said Feldman. If it becomes law, universities could still challenge it in the courts as discriminatory or for breaching possible First Amendment concerns.

But Levine said the tax was different to the other policies the Trump administration?has imposed,?including cuts to research funding, and it will be harder to seek judicial relief.

¡°Since seeking relief from the courts seems less likely, this massive tax increase will go into effect immediately and impose substantial hardship for these institutions.

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¡°It appears that is the goal. It is difficult to see how it is alleviated without subsequent legislative changes.¡±

And John Thelin,?university research professor emeritus at the University of Kentucky, warned that it would be time-consuming to amend a law, particularly for universities fighting many different battles.

¡°Philanthropy for colleges and universities is distinctive, if not unique, in its contribution to institutional health and self-reliance ¨C and has few counterparts for higher education elsewhere,¡± he added.

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¡°It seems strange to intrude on what has been a mutually beneficial practice and policy for the common good and institutional self-support.¡±

Large endowments is an issue that Trump has brought up repeatedly?since his first presidential campaign in 2016?¨C although then he wanted to see top universities spending their money on lowering tuition fees for students.

Along with?recent proposals to vet social media profiles?of international students,?the new policy was part of a broader threat towards higher education, said Amy Li, associate professor at Florida International University.

¡°The endowment tax and ban on international students are part of a large effort to stymie the regular operations of elite universities perceived to be liberal and promulgating a ¡°woke¡± agenda and advancing diversity, equity, and inclusion efforts.¡±

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patrick.jack@timeshighereducation.com