The tax benefits for education dont increase education
Higher Tuition, More Grade Inflation
In many applications, small data sets make it challenging to precisely identify such a kink in the data. But with millions of observations at their disposal, the authors are able to conclusively reject any effect of the tax credits. In other words, there were no kinks in enrollment at the point that tax credits fade-out.
In another paper, Bulman and Hoxby use a regression-discontinuity design to estimate the effects of the tuition tax deduction for families around the maximum income cutoff for eligibility. 2 Again, they find no evidence that the deduction increases college enrollment. They also find no effect of the deduction on https://getbadcreditloan.com/payday-loans-al/mobile/ enrollment intensity, college choice, tuition paid, or student debt.?
Why no effect? Tax credits and deductions priilies, whose decision on whether to send their kids to college is unlikely to be affected by a tax benefit that is relatively small in relation to their income or the costs of college attendance.
One Percent for the Kids
Another possible explanation is that the credits are delivered too late to affect enrollment. Families get their tax refunds well after tuition is due; a family who pays tuition in September won’t get a tax credit until at least the following January. At that point the credit is a nice windfall but has arrived too late to help with paying the tuition bills.
The complexity of the tax benefits also likely undermines their effect. We discuss this in greater detail in a paper that provides a comprehensive overview of the tax benefits for education. 3
An alternative way of looking at tax benefits for education is that they are a transfer program for middle-income families, putting more money in their pockets for all manner of expenditures, not just the costs of college. (more…)