Friday, September 7, 2007

New College Tax Credits: Emanuel-Camp-Bayh Bill Comes with Good and Bad Tax Policy

New bills in Congress would expand federal subsidies to higher education in a way that would likely help students little financially but would straighten out the current maze of federal subsidies, according to a new legislative analysis by the Tax Foundation.

The new legislation is designedto simplify the college tax credits; however, disagreement arises as to how much simpler the change makes the law, and it is even less clear how much actual assistance is provide to the students and their tax paying parents.

In a new study released by the Tax Foundation, author Gerald Prante argues that the Emanuel-Camp-Bayh Legislation (H.R. 2458 and S. 1501) does the most good by consolidating the three current provisions students and families can qualify for into one unified credit. The legislation would also bump the yearly tax relief cap up to $3,000 from the present $2,000 level. Prante notes, however, that this increase could be whittled away by colleges that choose to simply increase tuition in response to the increased tax relief offered to families.

The study also raises concerns about the expansion of the credit to include so-called "education related" costs. While such expenses, such as laptops, housing, transportation or supplies, could be properly utilized for school-related work, these credits could also easily be abused. In addition, receiving these credits would require additional paperwork and documentation, adding more complexity to the process instead of less, the bill's intended goal.

See Fiscal Fact No. 100, titled "Expand But Simplify? Education Credits Under Emanuel-Camp-Bayh," online at

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