Trump is about to remove Harvard’s tax-exempt status, here’s the university’s grim future

Harvard University has vowed it won’t surrender to Donald Trump’s ludicrous demands, so now he is determined to destroy it. Unfortunately for them, Trump has a lot of weapons at his disposal that can make life extremely difficult for one of the nation’s most admired learning establishments.

As a quick recap, Trump has demanded a campus ban on COVID face masks, the immediate closure of the university’s diversity programmes, that when asked they surrender any student to ICE for indefinite imprisonment, and that the university ban “any student group or club that endorses or promotes criminal activity, illegal violence, or illegal harassment” (what that constitutes will, of course, be decided by MAGA).

Similar demands were made of other universities, which caved. But Harvard put out a statement saying “the university won’t surrender its independence or relinquish its constitutional rights”. Harvard president Alan Garber said:

“No government – regardless of which party is in power – should dictate what private universities can teach, whom they can admit and hire, and which areas of study and inquiry they can pursue.”

Trump promptly dubbed them a “joke” that “teaches hate and stupidity” and is now determined to tear the place down. The administration has already frozen £2.2 billion in government grants and $60 million contracts, but is now moving to strip them of the ability to enroll foreign students, and is threatening to strip Harvard of its tax-exempt status. So, what would this mean in real terms?

Harvard without tax exempt status

Losing its tax-exempt status would be one of the most crippling blows Harvard could suffer, with consequences would rippling across its operations, finances, and broader influence. As a 501(c)(3) nonprofit, Harvard received huge benefits from tax exemptions on income, property, and donations, which significantly bolster its financial position.

Firstlu, Harvard would face immediate financial pressures. Its $50 billion endowment, one of the largest in the world, generates substantial investment income, currently tax-free. If the exemption were removed they’d owe federal and state taxes on those earnings, potentially costing hundreds of millions annually. Property taxes would also hit hard. Harvard owns extensive real estate in Cambridge and Boston, and local governments, eager for revenue, would be able to impose hefty levies. For context, Yale’s property tax exemption saves it roughly $150 million yearly; Harvard’s bill could be similar or higher. These costs would force budget cuts, likely affecting faculty salaries, research funding, or student services.

Tuition and fundraising would become much more difficult. Donors currently receive tax deductions for gifts, a major incentive for the mega-donations that have fuelled Harvard’s growth. Without them, philanthropy may well dry up, especially from high-net-worth individuals. To offset losses, Harvard might raise its already steep tuition, currently over $60,000 per year, further limiting accessibility. Alternatively, it could dip deeper into its endowment, but even that massive fund isn’t inexhaustible under sustained financial strain.

Harvard’s prestige and brand will inevitably also take a big hit, particularly if it becomes caught up in high-profile (and expensive!) legal battles against the administration and other bodies seeking tax revenue from them. Elite faculty and students might gravitate toward competitors like Stanford or MIT, which currently retain their exemptions. Harvard’s ability to attract international students, already in serious doubt, would be be lessened

Harvard is probably not going to disappear altogether, but may become one of the lesser Ivy League schools as its competitors bow to Trump’s demands. Starved for cash, they might prioritize revenue-generating courses, like executive education, over arts and social studies programs.

You might scoff at ivory tower intellectuals with a $50 billion endowment complaining about being asked to pay tax. However, most countries would kill to have a globally prestigious university like Harvard. It attracts the best and brightest minds to America, many of whom settle within the country and go on to generate huge amounts of wealth and hundreds of jobs. Tossing that away over a squabble over “DEI” or whatever is killing a golden goose for absolutely no reason.