by Scott A. Hodge, Kyle Pomerleau
July 17, 2014
Despite the dramatic rise in education tax credits, college has become increasingly expensive. Education tax credits are not well targeted toward low- and middle- income families. The overuse of tax credits by the federal government has turned the IRS into a spending agency, with refundable tax credits projected to double to nearly $200 billion in the next five years, largely due to the Affordable Care Act. Trading the elimination of education tax credits for lower marginal tax rates would grow the economy by $19 billion per year and create 121,000 jobs. Congress should consider other solutions to lessen the burden of tuition costs, such as increasing saving opportunities in the tax code, expanding pre-paid tuition plans to keep cost down, or reinvigorating well-targeted programs like Pell Grants and direct loans.