How Trump’s Proposed Endowment Tax Could Reshape Venture Capital
The High-Stakes Proposal That Has VCs Concerned
Ann Miura-Ko, co-founder of Floodgate Partners, has raised alarms about the Trump administration’s controversial plan to dramatically increase taxes on university endowments. At a recent Axios Dealmakers event, she highlighted the potential ripple effects across the venture capital ecosystem.
Key Concerns:
- Tax Rate Surge: Proposal would increase endowment tax from 1.4% to 35%
- VC Funding Impact: University endowments are major limited partners in private equity
- Ecosystem Risk: Could significantly reduce capital available for startups
“While many see endowments as wealthy institutions,” Miura-Ko explained, “they’re actually critical funding sources for venture capital and private equity. This tax hike could have unintended consequences for innovation funding.”
Political Context and Potential Outcomes
This isn’t the first attempt at such legislation. Vice President-elect J.D. Vance previously proposed similar measures as a senator through Senate Bill 3514, which was blocked by Democrats.
Why This Time Might Be Different
- Stronger political alignment in Washington
- Increased focus on university finances
- Growing scrutiny of endowment spending
However, the proposal faces significant hurdles. Many Trump administration appointees and donors come from venture capital backgrounds, creating potential internal resistance.
What This Means for the Startup Ecosystem
If enacted, this policy could:
- Reduce available venture capital as endowments scale back private market investments
- Shift funding priorities toward more tax-advantaged assets
- Create opportunities for alternative funding sources to emerge
Industry experts suggest watching these developments closely, as the outcome could significantly impact innovation funding for years to come.
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