Stop Subsidizing the Upper Middle-Class

Thursday, April 19, 2012
Today Stephen Burd from Education Sector released a provocative new report that fully supports my contention (and that many others including Sandy Baum, Mike McPherson, Rick Kahlenberg) that we should stop subsidizing the upper middle-class with tax credits for college, and start focusing federal financial aid on those who need it most: Pell recipients.

Every time I've publicly discussed this idea I've been attacked as not caring about the middle-class.  This is a red herring-- suggesting that scarce dollars should be targeted to those who most need and will most benefit from them is simply good policy making. It's not about "who cares about whom."  As I pointed out following Obama's latest speech in Michigan, tax credits are demonstrably ineffective at their goals.  Burd calls a spade a spade when he adds, "Notably, while policymakers continue to tout the tuition tax breaks as a middle-class benefit, the introduction of the AOTC led to significant reductions in the share of the overall benefits going to families making between $25,000 and $75,000."

As a result, of the $55 billion distributed in college tax credits between 2010-2014, most will go to families earning over $100,000.  Tax credits don't make or break their children's decisions about attending or college, and are unlikely to even affect where they attend or how long they take to finish.  Instead they operate as a sort of "reward" to the family for having a college-bound child, and a little "apology" for the high costs. Of course these are nice things for the government to do for families, but since they don't change student outcomes, they simply aren't necessary.  Well, mostly.  The one caveat is that they may incur some political support for aid programs generally, a benefit that accrues to all recipients.  But that's very hard to demonstrate, and probably isn't worth their high cost.

Let's hope that Congress is listening, and stops attacking the Pell program as inflated and unbearable. What's clearly not needed are these tax credits.  Enough already.