Tax credits for tuition (unintended consequences)

On the outset, this seems a mighty fine idea… but it doesnt quite go far enough, and is open to a ton of abuse. Not at the student level per se (they are the ones being abused), but at the state and educational institution domain. The problem in a nutshell, is that educational systems often charge a price just below what the market will bear. If there is excess money in the hands of the student and/or their parents, tuition will go up. Whether the increase is due to reducing the states percentage of funding as a whole, or an intentional shift to put more of the tuition burden on the student in order to pork pet projects, it will occur. Thus. Al Franken’s as well as Obama’s smaller plan, are a very good thing, but they are only a short term fix… state govts and other institutions in short order will proceed to eat up that tax credit through tuition increases. Its a windfall deal for many states… they can simple shift funding priorities around, such that they can fund their favorite programs.

Wisconsin is a prime example of this… pretty much as the economy grew, or more student loans became available, more and more of the burden was placed on the student.

* Interesting facts from

UW’s share of General Purpose Revenue… decreased 39% between 1975 and 2005
State tuition support per student decreased from 75% in the seventies to 24% in 2005-2006
Corrections share of General Purpose Revenue increased 280.7% between 1975 and 2005

Thus… if Wisconsin really wanted to make tuition affordable, they could, its just a matter of priorities. Simply returning to the tuition support levels like they had in the seventies would result in greater than a 50% reduction in tuition, albeit it would be unpopular with the corrections folks and others with a vested interest in pork. I wonder how many tax payers, students, and parents are truly aware of this. (The priority shift in funding was in the Alumni newsletter some years back… I was appalled)

I fear that expansion of the tuition tax credit in and of itself, will result in state govts having a field day with their pet projects and priorities other than education. That being said… in the short term, I support the ideas 100%, as something does need to be done, and it needs to be done now. Over time though, it just has to be followed up one way or another. US federal taxpayers sure don’t need to¬† subsidizing the building and operations of prisons in Wisconsin, or any other state under the guise of student tax credtis. Education funds as a result of this tax credit need to go to education alone, and not be porked into other arenas.

* be aware… stats can be misleading, and there are kazillions of permutations and ways to present data. I specifically chose these facts to show an extreme case of absurdity as to what can go wrong… and yes, that is cherry picking, but they are backed up by data in the report.

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