Paul L. Caron

Thursday, November 19, 2015

$23 Billion In Annual Federal Tax Credits For Higher Education Have No Effect On College Attendance

NBER, Who Benefits From Federal Tax Credits For Higher Education?:

Researchers find that tax credits for higher education have little or no effect on college attendance; the credits are essentially transfer payments - and not primarily to the needy.

In 2014, the federal government spent about $23 billion on three programs offering tax credits to households paying for higher education. In The Returns to the Federal Tax Credits for Higher Education (NBER Working Paper No. 20833), George B. Bulman [UC-Santa Cruz] and Caroline M. Hoxby [Stanford] find that the credits have little or no effect on college-going in the U.S. The credits do not affect whether students enroll at all, whether they attend four-year colleges, how expensive their colleges are, or the scholarships and grants they receive. The authors conclude that the tax credits are primarily "a transfer from some individuals to others." ...

The credits are often justified as "paying for themselves" under the notion that they raise educational attainment and consequent earnings. The evidence does not support this justification.

Tax Foundation, New Study Shows that Tuition Deduction Does Not Increase College Attendance

Legal Education, Scholarship, Tax | Permalink