Harvard clash with Trump, new tax may cost $1 billion a year

Harvard University warned that the combined cost of federal actions against the school, including a recently passed tax increase on its endowment, could approach $1 billion annually.

The university said its leadership in each school and unit will continue to cut expenditures and a hiring freeze for faculty and staff remains in place, according to a letter sent out by president Alan Garber and other leaders on Monday.

“The unprecedented challenges we face have led to disruptive changes, painful layoffs, and ongoing uncertainty about the future,” Garber and the officers wrote.

The Trump administration has made Harvard its primary target in its efforts to reshape higher education, freezing more than $2.6 billion in research funding, threatening its tax-exempt status and trying to stop international students from enrolling. The government initially accused the school of failing to tackle antisemitism, but the attack has broadened to include accusations of political bias and for promoting diversity initiatives in hiring and admissions.

Harvard has sued the government twice, for cutting off federal funding including from the National Institutes of Health and National Science Foundation, and to prevent a ban on international students, who have been a large source of revenue.

“We hope that our legal challenges will reverse some of these federal actions and that our efforts to raise alternative sources of funding will be successful,” the officials wrote. “As that work proceeds, we also need to prepare for the possibility that the lost revenues will not be restored anytime soon.”

The school, the richest and oldest in the US, has a $53 billion endowment which provides almost 40% of its annual operating budget. Last year, Harvard’s operating revenue base was $6.5 billion, according to its annual report. Operating expenses were $6.4 billion after increasing 9%.

Harvard explained in the letter that the reconciliation bill passed this month could raise the federal tax on income from its endowment to as high as 8% from 1.4%.