Duke University, Davidson College face 'woke' tax in proposed 'big beautiful bill'

Two schools in North Carolina — Duke University and Davidson College — may end up caught in the crossfire of President Donald Trump’s attempts to rein in “woke, elite” institutions.

House Republicans have proposed increasing taxes on Duke and Davidson’s endowments from 1.4% to 7%. That leaves university officials, and even at least one North Carolina House Republican, looking to senators for potential pushback.

“We’re hoping for some relief,” said Doug Hicks, president of Davidson College, in an interview with McClatchy.

This is all part of H.R. 1, known as the One Big Beautiful Bill Act, that passed the House last week.

It is a $3 trillion tax and spending package that looks to fulfill several of Trump’s campaign promises. The bill includes cuts to Medicaid, the Supplemental Nutrition Assistance Program and clean energy tax incentives.

Woke, elite universities

The proposal came out of the House Committee on Ways and Means, where Rep. Greg Murphy, a Republican from North Carolina, serves. The committee released a statement on the provision saying the proposed tax “holds woke, elite universities that operate more like major corporations and other tax-exempt entities accountable, ensuring they can no longer abuse generous benefits provided through the tax code.”

An endowment is the combination of donated assets to a college or university that is invested in order to generate additional revenue for future generations.

Harvard University, in Massachusetts, has one of the highest student-adjusted endowments and has found itself as odds with Trump throughout his second term for allowing pro-Palestinian protests to take place and hiring employees he believes promotes leftist views.

Trump retaliated against the school, freezing $2.2 billion in federal grants and threatening to revoke the school’s tax-exempt status. On Tuesday, the Trump administration announced plans to revoke all federal funding to Harvard.

Both Davidson and Duke are tax-exempt.

North Carolina private schools

Thirty-six private colleges and universities are located in North Carolina, including historically Black colleges and universities and smaller religious colleges.

The bill calculates which colleges would be taxed, and how much, based on their student-adjusted endowments. Typically, a student-adjusted endowment divides the endowment by the total number of students. But Congress added other factors to the bill, like student loan interest or money the school is making from federal-grant-funded research. It omits foreign students from a school’s total enrollment figure, subjecting schools with more international students to higher rates.

Depending on the results of that mathematical equation, a school could be taxed from 1.4% to 21%.

The New York Times crunched the numbers and created a list of 58 schools that could be affected. Both Davidson and Duke made the list.

The Times found that under the proposed guidelines, Davidson College would have an $800,000 student-adjusted endowment. Duke University is estimated to have a $950,000 student-adjusted endowment. Both figures fall under a 7% tax bracket.

If either reached a student-adjusted endowment of $1.25 million, the tax would grow to 14%. After reaching a $2 million student-adjusted endowment, the tax grows to 21%.

Tax impact

Duke University did not respond to requests for comment on this article.

Davidson College’s total endowment was $1.4 billion as of June 2024.

Hicks told McClatchy the student-adjusted endowment for Davidson that The New York Times came up with appears accurate.

“We’re a well-resourced school and the endowment has grown from the generosity of private individuals and foundations,” Hicks said.

And Hicks added that the school uses the endowment to offer its students financial aid.

“We cover 93% of our financial aid ourselves, and a significant portion of that comes from the endowment,” Hicks said. “We believe we’re being good stewards of our endowment with the different resources we have to provide access, opportunity and affordability to our students.”

Now he’s looking at the tax rate going up 400%, a five-fold increase or a $6 million hit. The school could survive, he said, but would face “serious pressure” on its financial aid budget.

“It would create serious pressure on our financial aid budget and our ability to be need blind, to meet 100% of demonstrated need for all students, and to do so without loans in our package,” Hicks said.

Foreign students

A tax on Davidson College isn’t new. Congress passed a 1.4% tax on schools including Davidson College during Trump’s first term.

But when the guidelines for that tax was created, foreign students were included in the enrollment figure. Hicks said he’s concerned that Davidson’s 210 foreign students, or 11% of the student population, would be excluded.

“It ends up becoming a perverse incentive to not have international students on your campus,” Hicks said. “International students provide so much in educational value. They provide perspective, but they also provide a lot economically to America. They either take American values back to their country or they’re an educated workforce that stays in the U.S.”

Rep. Valerie Foushee, a Democrat from Hillsborough who represents Duke University, spoke out against the exclusion of international students in a statement to McClatchy.

“The Republicans’ inclusion of a tiered rate system in their reconciliation package will not only raise taxes on universities across the country but is another blatant attempt to push international students out of our schools,” Foushee said.

“If signed into law, this proposal will have significant impacts throughout the Fourth District, which relies heavily on the research efforts supported by university endowments and the contributions of the global STEM talent that our local universities attract.”

Religious exemption

When House members voted on the bill, it included an exemption that brought the college some hope. It exempts some religious institutions. And Davidson College officials say they believe they would qualify.

Schools must meet certain criteria to be exempt: they must have been founded after July 4, 1776, have been founded by and maintained a relationship with a religious institution, and have a published mission statement with religious tenets, beliefs, or teachings.

“Davidson welcomes students and employees of all faiths and has maintained an affiliation with the Presbyterian Church (USA) since its founding in 1837, and the college’s Statement of Purpose is drawn from our religious foundation,” university officials wrote to McClatchy prior to Hicks’ call. “We believe we qualify for the exemption included in the House bill, and we recognize that the legislation now has to go through the Senate.”

But Rep. Tim Moore, a Republican from Kings Mountain, has a different opinion.

“Congressman Moore strongly supports the One Big Beautiful Bill overall, but he recognizes concerns have been raised with the provision and is hopeful the Senate will refine it,” said Grace Davis, Moore’s spokeswoman. “Additionally, our understanding is that Davidson would not fall under the religious exemption, as they’ve made it very clear they are not a religious institution.”

In a follow-up email, Davis said, “Their own website claims they are nonsectarian: ‘The loyalty of the college thus extends beyond the Christian community to the whole of humanity and necessarily includes openness to and respect for the world’s various religious traditions.’”

The sentence just before that on the website states: “The Christian tradition to which Davidson remains committed recognizes God as the source of all truth, and believes that Jesus Christ is the revelation of that God, a God bound by no church or creed.”

Duke University also has ties to religious groups. It was founded in 1838 by the Methodists and Quakers. Though the school maintains symbolic ties to the Methodists, its mission statement does not include anything about religion.

Lobbying Congress

Davidson and Duke are still a long way off from certainty about whether this provision becomes law.

The bill passed the House 215-214-1, along party lines. Reps. Thomas Massie, of Kentucky, and Warren Davidson, of Ohio, voted with Democrats, and Rep. Andy Harris, of Maryland, voted “present.”

The bill is now before the Senate, where it will likely undergo massive changes before reaching a floor vote.

Foushee said she’s trying to keep the provision out of the final bill.

Hicks said he’s met with at least a dozen senators or their staff.

“We find a lot of appreciation for the fact that we have no loans in our packages so our students tend to graduate without debt,” Hicks said. “They appreciate the high graduation rate of our student body, which is 92% and they appreciate that a quarter of our U.S. students are Pell eligible, so low income, and that they graduate actually with a slightly higher percentage than everyone else at Davidson.”

Hicks said now he’s hoping that these senators stand up for higher education, and Davidson students.

He hasn’t spoken to Sen. Ted Budd, a Republican from Davie County, since December, but has spoken to Sen. Thom Tillis, a Republican from Huntersville.

“Sen. Tillis has regularly spoken about the high value that both the public and private institutions, colleges and universities, in North Carolina, provide our economy and for our workforce,” Hicks said. “So we appreciate his support for higher ed.”

Tillis did not respond to a request for comment on the provision. Budd’s team said they had no comment to offer.

Budd has rarely departed from Trump’s agenda. Tillis has been vocal about changes needed in the bill, though his focus has been on the means by which Republicans plan to repeal clean energy tax breaks.

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