On April 14, Harvard University took a public stand against the Trump Administration’s demands to scale back diversity, equity, and inclusion initiatives in hiring, admissions, and programs, to closely monitor international students, and to cede academic independence across various programs. In response, the Trump Administration froze roughly $2.2 billion in federal funding allocated to Harvard.
On April 15, via Truth Social, President Trump threatened Harvard’s tax-exempt status, stating: “Perhaps Harvard should lose its Tax Exempt Status and be Taxed as a Political Entity if it keeps pushing political, ideological, and terrorist inspired/supporting ”Sickness?” Remember, Tax Exempt Status is totally contingent on acting in the PUBLIC INTEREST!”
To better understand the implications of Trump’s threats, I spoke with scholars, leaders, and philanthropy experts on the history and potential consequences of using federal power to punish a university for its stance on academic and social issues.
John Thelin, professor emeritus at the University of Kentucky and author of A History of American Higher Education, called the situation “ironic,” especially given the country’s emphasis on wealth creation and stewardship of that wealth. He stated, “This episode seems to penalize educational institutions such as colleges and universities for being good stewards of their good fortune.” Thelin offered a reminder that Harvard’s core endowment is not the result of one industrial magnate, like a Rockefeller, Carnegie, or Johns Hopkins, but was built over time through careful planning and a broad donor base. “Harvard cultivated its endowment through thoughtful organization and reliance on many moderate and small gifts as well as some larger ones.”
Thelin also pointed to a lingering double standard in U.S. tax policy. The 2017 Tax Cuts and Jobs Act (TCJA) imposed a 1.4% tax on the investment income of certain private university endowments, targeting elite private universities such as Harvard, Yale, Stanford, and Princeton, while exempting large public institutions with similarly sized endowments. Thelin asked, “Why is there no mention or inclusion of state universities such as the University of Texas and Texas A&M, whose respective endowments are, I believe, in the top ten of all institutions?”
This approach to taxation may open the door to more aggressive policies, said Robert Kelchen, professor at the University of Tennessee, Knoxville. He noted, “The Trump administration has shown a clear trend of acting first and then seeing if it holds up in court.” While Kelchen sees the tax-exemption threat as concerning, he believes the more serious issue is the potential for a sharply increased endowment tax – possibly as high as 35% on investment returns. He explained, “That level of tax rate would severely impact Harvard given that their endowment funds about one-third of their overall operations.” Kelchen argued, “The 1.4% tax implemented in 2017 sent a message to elite higher education that they are on notice and cleared the path to a much larger increase now.”
Beyond the economics, Trump’s threats raise constitutional questions around institutional autonomy. According to Noah Drezner, an expert on philanthropy and a professor at Teachers College, Columbia University, Harvard’s defiant response – declaring it would “not surrender its independence or relinquish its constitutional rights” — reflects a level of privilege most institutions simply do not possess. Drezner shared, “This privilege stems largely from its $53.2 billion endowment—staggeringly higher than the median endowment in U.S. higher education, which stands at approximately $244 million.” He emphasized that about 30% of Harvard’s endowment is unrestricted, giving the university “unparalleled flexibility.” While the university’s spending rate aligns with peer institutions at around 5% to 5.5%, Drezner noted that Harvard could adjust this rate to withstand political threats – something few other colleges could afford to do.
But Drezner’s concerns go well beyond finances. He warned, “President Trump’s public threats to revoke Harvard’s tax-exempt status or to impose additional taxes on its endowment signal a troubling weaponization of the IRS code and congressional authority.” He argued, “These actions aim to undermine academic freedom, curtail U.S. research innovation, and weaken higher education’s ability to contribute to the public good.”
Drezner also pointed out that political threats are already having an impact on donor behavior. He stated, “Harvard experienced its largest decline in endowment contributions last year, raising $193 million less in new endowed funds—a sharp drop compared to previous years and a sign of donor discontent.” And while Drezner acknowledged the real concerns surrounding how Harvard addresses antisemitism on campus, he was unequivocal in his stance that: ”Using federal taxation and political interference as a lever to induce institutional change is not only misguided—it’s dangerously shortsighted.”
Julian Vasquez Heilig, a professor at Western Michigan University, echoed Drezner’s concerns, adding that such political maneuvering opens a door that future administrations may also exploit. “Yes, it may be feasible [to tax Harvard’s endowment] —but once the government is allowed to reshape private institutions through political pressure, future administrations will likely follow suit,” he said. “Using tax policy to punish dissent sets a dangerous precedent. Today’s target might be Harvard—tomorrow’s could be Liberty University, Brigham Young University, or whoever challenges those in power.” Heilig pointed out that the pendulum always swings back.
Heilig also reminded us, “Endowments are not slush funds—they are strategic, donor-driven investments in student access, research, and public service.” And for those who favor revoking Harvard’s tax-exempt status as part of allegiance to a political party, Heilig warned, “Federal overreach may feel justified when it favors your position—but would you want those same tools used against you when the political tide turns? Weaponizing bureaucracy may yield short-term wins, but it invites long-term chaos. A nation governed by retaliation instead of liberty and principle is one in constant crisis. Once political pressure becomes normalized, every institution becomes vulnerable—not just the ones we disagree with.” He added, “Institutional leadership becomes paralyzed when funding is contingent on political loyalty. Boards and presidents should answer to their educational mission—not spend the majority of their time interpreting political winds from Washington.”
Ben Ralston, President and CEO of The Sachs Foundation, placed the controversy in a historical context. He said, “The Harvard endowment is older than the nation itself. Until now, every U.S. administration, especially conservative ones, has upheld the principle that private money is just that — private.” Stripping Harvard’s nonprofit status over ideological disagreements would set a precedent that, in Raltson’s view, should concern everyone, not just Harvard’s allies. “Schools, churches, hospitals, civic leagues, public charities, and foundations of all kinds will be forced to pass a single binary test to exist: Are you pleasing Donald Trump, or are you not?”
Ralston sees hope in the collective power of institutions. Yale, MIT, and Stanford have already voiced support for Harvard’s stance, and Ralston believes more will follow. “If more universities, nonprofits, and foundations — especially those with private endowments — continue to build a coalition against such an obvious breach of American ideals, this no longer becomes Donald Trump vs. Harvard, but Donald Trump vs. the very idea of private funding. And that is a fight he has no chance of winning.”
Ultimately, this moment is about far more than tax status or even one university’s autonomy. It raises a foundational question for our democracy: Will institutions of higher education be allowed to act in the public interest, even when that interest diverges from the priorities of those in power? If tax policy becomes a weapon to enforce ideological conformity, then the future of academic freedom and civic freedom is at risk.
The true test is not whether Harvard can withstand the pressure—as it almost certainly can—but whether we as a nation will defend the principles that make dissent, inquiry, and institutional independence possible in the first place.