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Abstract

This Article presents a policy and a structural response to a national capacity failure in American higher education: the concentration of endowment wealth in a handful of elite institutions, while most colleges, those that educate the majority of Americans, including most low-income, first-generation, and underrepresented students, operate under permanent financial constraint, and remain drastically underfunded. This imbalance carries a profound social cost. It weakens equity, limits inclusion, and undermines the promise of upward mobility that higher education is supposed to deliver.

The proposed framework introduces a progressive excise tax on endowment investment returns, scaled by per-student wealth. Universities with excessive capital would be required to meet minimum spending thresholds for academic priorities such as need-based aid, tenure-track hiring, and research infrastructure. The revenue would support two federal programs. The first, a permanent Education Equity Fund, would deliver formula-based support to under-resourced institutions based on enrollment, student need, regional disadvantage, and research potential. The second, a Competitive Capacity-Building Grant Pool, would fund high-impact institutional growth projects at colleges historically excluded from major federal research investment.

This model provides a concrete, enforceable path toward equity, inclusion, and upward mobility. It strengthens institutions that serve diverse student populations without undermining the success or autonomy of elite universities. Rather than punishing excellence, the proposal balances the needs of top-tier schools and their students with broader public interests and needs. Overall, the model ties tax privileges to public purpose and accountability and offers a blueprint for a higher education system that is not only highly competitive and innovative but also equitable, inclusive, and fair.

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