GOP megabill takes aim at universities — except for this conservative Christian college

Politico

4 hours ago

President Donald Trump and Republicans in Congress are angling to use their megabill to turn the screws on elite liberal colleges that take millions in taxpayer funds while sitting on endowments worth tens of billions of dollars. But a single college that's a paragon of conservative higher education has managed to secure a carveout after finding itself in the crossfire.
Hillsdale College, a Christian liberal arts school of fewer than 2,000 students located in southern Michigan, is one of a slew of smaller institutions that had been working to avoid being swept up in the GOP effort to raise taxes on the seemingly bottomless endowments of household names like Harvard, Princeton and Yale.
But Hillsdale stands apart from those schools: For one, it's a rare institution of higher learning that the modern Republican Party applauds. Just as uncommon, Hillsdale accepts no funding from the federal government: 'The founders of our nation chose independence. As do we,' the college boasts in advertisements.
That formed the crux of its argument that, on principle, Hillsdale and schools like it should not be subject to a federal tax on endowments. Senate Republicans heeded that logic in their version of the reconciliation bill that the party hopes to send to Trump's desk next week by including an exemption for schools that fit Hillsdale's profile.
The reprieve is by no means guaranteed, as Hillsdale found out eight years ago. Democrats that year seized on the university's unique position, branding the exemption as an earmark for a political ally and ultimately getting it stripped from the 2017 Tax Cuts and Jobs Act with the help of a handful of Republican senators.
That's why Hillsdale turned earlier this year to professional advocates for help with the latest endowment tax proposal.
In April, the college retained Williams and Jensen to lobby on 'specific threats to the institutional and financial independence of the college, primarily related to the higher education endowment tax,' according to a disclosure filing.
The team of lobbyists working on the account includes Dan Ziegler, who served as House Speaker Mike Johnson's top policy aide before returning to the lobbying firm in March, and who previously served as executive director of the conservative Republican Study Committee.
In its meetings with policymakers, Hillsdale has reiterated its general opposition to using the tax code as a blunt force object — reaching often for the declaration from former Supreme Court Chief Justice John Marshall that 'the power to tax involves the power to destroy.'
Beyond that, it has stuck to its insistence that schools that have sworn off taxpayer money should be left out of the endowment tax scheme altogether. That could end up incentivizing more institutions to follow in Hillsdale's footsteps — especially with the Trump administration taking aim at colleges' federal funding — whereas a tax hike might throw up financial roadblocks for schools who might be eyeing a move toward independence.
Hillsdale's message has landed favorably on the Hill, according to a person familiar with those discussions who was granted anonymity to discuss sensitive deliberations. The person noted that the school hadn't encountered much opposition to its position on principle.
Failing to exempt schools that don't accept federal funds 'penalizes most severely those institutions that have chosen the harder path of independence' from the federal government and the conditions of accepting that money, Hillsdale President Larry Arnn wrote in an op-ed in May.
'Worse still,' he added, 'this tax turns the incentives backward; it rewards dependence and punishes self-reliance. It encourages institutions to seek the shelter of government aid, where subsidies can offset tax burdens.'
Hillsdale declined to comment on the record.
Hillsdale has proudly touted its independence for refusing direct government funds since its founding by abolitionists in 1844.
In the 1980s, Hillsdale was faced with a Supreme Court civil rights ruling that would've required universities to track admissions by race and bar sex-based discrimination in order to accept federal financial aid from students. In response, the school declared that it would no longer accept such assistance.
Hillsdale's break from what it calls governmental overreach has made it at home with the right. Conservative luminary William Buckley donated much of his lifetime of writings to the school in the early 2000s. In 2016, Hillsdale hosted Supreme Court Justice Clarence Thomas as its commencement speaker.
More recently, Republican leaders like Florida Gov. Ron DeSantis have sought to recreate versions of Hillsdale in their home states and to integrate its curriculum in K-12 classrooms.
Hillsdale graduates are scattered throughout Washington, including in the offices of the top Republicans in Congress. Michael Anton, who joined Hillsdale's D.C. outpost after working in the first Trump administration (though he's not a Hillsdale grad himself), was tapped in April to lead the U.S. technical team in nuclear negotiations with Iran.
The university regularly advertises its free online courses on subjects like ancient Christianity and the Biblical book of Genesis on Fox News, and rents various conservative email lists. Arnn, a co-founder of the conservative think tank the Claremont Institute, was even considered for Education secretary in Trump's first administration. Trump's eventual Education secretary, Betsy DeVos, has her own familial and financial ties to Hillsdale.
In Trump 2.0, the universityhas partnered with the White House and the Education Department on an educational video series to promote the 250th anniversary of America's founding. The most recent installment, focused on the founding of the U.S. Army, featured Defense Secretary Pete Hegseth.
Even with those credentials, as the GOP continues tinkering with the bill ahead of final passage, there's one hitch that could complicate things: At least right now, there aren't believed to be any other schools besides Hillsdale that don't accept federal cash and have large enough endowments that they're at risk of being hit by the endowment tax.
Wealthy universities were first hit with a 1.4 percent excise on their endowments as part of the 2017 GOP tax bill. Given that the relationship between Republicans and higher education has only crumbled in the years since, colleges across the country had already been bracing for Republicans to take another swing at the excise tax in negotiations to renew expiring provisions in the Tax Cuts and Jobs Act.
There's a tranche of smaller colleges that would be hit hard by an endowment tax hike and are trying to distance themselves from the Ivies in conservatives' crosshairs.
But even though Hillsdale would likely benefit from some of the endowment tax changes those schools have pitched lawmakers on, including sparing schools smaller student bodies, the college has thus far declined to take other schools up on overtures to join their coalitions as it leaned on its more unique messaging.
Hillsdale isn't in the clear yet. There are questions about whether several of Republicans' changes to the endowment tax are allowed under the arcane procedural rules of the reconciliation process. The exclusion was not included in the House version of the bill, and not much is set in stone amid horsetrading within the conference.
The specter of the last Republican tax debate also looms large given Hillsdale's distinctive position.
Earlier versions of the 2017 Tax Cuts and Jobs Act would have subjected schools with endowments of at least $250,000 per student to the excise tax. But during floor debate in the Senate, Sen. Ted Cruz (R-Texas) — who received an honorary degree from Hillsdale in 2013 — and then-Sen. Pat Toomey (R-Pa.) introduced an amendment that would have exempted from the tax any otherwise-eligible schools that don't take federal funding.
The amendment triggered an outcry from Senate Democrats, who pointed out that the only university that would apply to was Hillsdale.
Four Republican senators ended up voting with all Democrats to sink the amendment.
Hillsdale still managed to luck out, but only temporarily, thanks to language in the final bill that raised the threshold for the tax to $500,000.
The House reconciliation bill retains that threshold for the 1.4 percent tax, but neither measure indexes it to inflation, effectively lowering the threshold as time goes on. Hillsdale's endowment finally reached eligibility a few years ago, and much further down the line, other schools that have sworn off federal funding may eventually join it.
If the Senate version prevails, however, Hillsdale would pay nothing.
In Arnn's May op-ed, he wrote that the House-passed reconciliation bill leaves 'untouched the vast web of colleges and universities sustained by taxpayer dollars, often bloated with bureaucracies committed to fashionable ideas, far removed from the purposes of education.'
Ironically, some of the biggest winners out of the Senate's version of the endowment tax — aside from Hillsdale — were schools with the biggest endowments, like Harvard, that would have seen their tax rate soar to 21 percent under the House bill. Senate Republicans softened the tax hike to less than 10 percent for the wealthiest universities.