Tax Extenders Resurrected: Insights on Higher Education Tax Reform from the Recent Legislation on the Tuition and Fees Deduction
Keywords:education tax spending, fiscal responsibility, tuition and fee deduction, tuition tax credits
U.S. legislators recently brought back thirty-four tax programs from legislative limbo, extending them for three years. This includes the tuition and fee deduction, used by taxpayers to save on college expenses. This regressive tax policy flows heavily towards higher-income levels, with almost a third of the deduction going to those with incomes between $100,000 and $200,000. Previous empirical research indicates the policy has had no effect on increasing college enrollment. It is imperative that researchers, policymakers, and practitioners remediate duplicative, fiscally irresponsible tax policy. To guide this remediation, I provide a legislative history of the tuition and fees deduction, duplicative effects of current education tax incentives, critiques against the current tax extender package, and recommendations for higher education tax reform.
Association of International Certified Professional Accountants. (2017). Guiding
principles of good tax policy: A framework for evaluating tax proposals. Retrieved from https://www.aicpa.org/advocacy/tax/downloadabledocuments/tax-policy-concept-statement-no-1-global.pdf
Bell, K. (2019, February 17). Expired tax extenders not yet on track for renewal [Blog post]. Retrieved from https://www.dontmesswithtaxes.com/2019/02/tax-extenders-not-yet-on- track-for-renewal.html
Bulman, G., & Hoxby, C. (2015). The returns to the federal tax credits for higher education. Tax Policy and the Economy, 29(1), 13–88.
Burman, L., & Phaup, M. (2012). Tax expenditures, the size and efficiency of government, and implications for budget reform. Tax Policy and the Economy, 26(1), 93–124.
Crandall-Hollick, M. L. (2018). The American Opportunity Tax Credit: Overview, analysis, and policy options (Congressional Research Service Report R42561). Retrieved from https://fas.org/sgp/crs/misc/R42561.pdf
Davis, A. (2002). Choice complexity in tax benefits for higher education. National Tax Journal, 55(3), 509–538.
Dynarski, S., & Scott-Clayton, J. (2006). The cost of complexity in federal student aid: Lessons from optimal tax theory and behavioral economics. National Tax Journal, 59(2), 319–356.
Economic Growth and Tax Relief Reconciliation Act of 2001, Pub. L. 107-16, 10 USC §105, (2001).
Emergency Economic Stabilization Act of 2008, Pub. L. 110-343, 122 Stat. 3765, (2008).
Guzman, G. (2018). Household income: 2017. American Community Survey Briefs. Retrieved from https://www.census.gov/library/publications/2018/acs/acsbr17-01.html
Hoxby, C., & Bulman, G. (2016). The effects of the tax deduction for postsecondary tuition: Implications for structuring tax-based aid. Economics of Education Review, 51(1), 23–60.
Huang, C. (2019, March 12). Unfinished business from the 2017 tax law. Center on Budget and Policy Priorities. Retrieved from https://www.cbpp.org/federal-tax/unfinished-business-from-the-2017-tax-law
Internal Revenue Service (IRS). (2017). Tuition and fees deduction, Form 8917. Retrieved from https://www.irs.gov/pub/irs-prior/f8917--2017.pdf
Joint Committee on Taxation (JCT). (2015). Technical explanation of the Protecting Americans from Tax Hikes Act of 2015. Retrieved from https://www.jct.gov/publications.html?func=startdown&id=4861
Joint Committee on Taxation (JCT). (2018). Estimates of Federal Tax Expenditures for Fiscal Years 2017-2021. Retrieved from https://www.jct.gov/publications.html?func=startdown&id=5095
Joint Committee on Taxation (JCT). (2019a). About us: Overview. Retrieved from: https://www.jct.gov/about-us/overview.html
Joint Committee on Taxation (JCT). (2019b). Estimates of federal tax expenditures for fiscal years 2019-2023. Retrieved from https://www.jct.gov/publications.html?func=startdown&id=5238
Joint Committee on Taxation (JCT). (2019c). Estimated budget effects of the revenue provisions contained in the House amendment to the Senate amendment to H.R. 1865, the Further Consolidated Appropriations Act, 2020. Retrieved from https://www.jct.gov/publications.html?func=startdown&id=5237
Government Accountability Office. (2005). Understanding the tax reform debate (GAO Report No. 05-1009SP). Retrieved from https://www.gao.gov/assets/210/202725.pdf
Grassley, C. (2019, February 14). Grassley on tax extenders and disaster tax relief [Prepared remarks]. Retrieved from https://www.grassley.senate.gov/news/news-releases/grassley- tax-extenders-and-disaster-tax-relief
LaLumia, S. (2012). Tax preferences for higher education and adult college enrollment. National Tax Journal 65(1), 59–89.
Long, B. (2004). The impact of federal tax credits for higher education expenses. In C. Hoxby (Ed.), College choices: The economics of where to go, when to go, and how to pay for it (pp. 101–168). Chicago, IL: University of Chicago Press.
Mazur, M., & Pozen, R. C. (2019). Temporary tax policy in the United States. Tax Policy Center Urban Institute & Brookings Institution. Retrieved from https://www.taxpolicycenter.org/publications/temporary-tax-policy-united-states/full
Pew Research Center. (2015, December 9). The American middle class is losing ground. Pew Research Center. Retrieved from https://www.pewsocialtrends.org/2015/12/09/the-american-middle-class-is-losing-ground/
Pike, A. (2007). No wealthy parent left behind: An analysis of tax subsidies for higher education. American University Law Review, 56(5), 1229–1260.
Pomerleau, K. (2019, March 3). Temporary policy in the federal tax code. Tax Foundation. Retrieved from https://taxfoundation.org/testimony-temporary-tax-policy/
Protecting Americans from Tax Hikes of 2015, Pub. L. 114-113, §2, 161 Stat. 183 (2015).
Sherlock, M. (2018, October 22). Tax provisions that expired in 2017 (CRS Report No. R45347). Retrieved from https://fas.org/sgp/crs/misc/R45347.pdf
Sherlock, M. F., Keightley, M. P., Gravelle, J. G., & Driessen, G. A. (2018). Recently expired individual tax provisions: In brief (CRS Report No. R44925). Retrieved from https://fas.org/sgp/crs/misc/R44925.pdf
Stoll, A., & Stedman, J. (2003). Higher education tax credits and deductions: An overview of the benefits and their relationships to traditional student aid. In R. Nata (Ed.), Progress in Education (231–252). New York, NY: Nova Science Publishers.
Tax Cut and Jobs Act of 2017, Pub. L. 115-97, 131 Stat. 2054, (2017).
Tax Increase Prevention Act of 2014, Pub. L. 113-295, 128 Stat. 4010, (2014).
Tax Extender and Disaster Relief Act of 2019, S. 617, (2019).
Tax Relief and Health Care Act of 2006, Pub. L. 109-432, 120 Stat. 2922, (2007).
Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Pub. L. 111-312, 124 Stat. 3296, (2010).
Thompson, M. (2019, March 12). Thompson opening statement at select revenue measures subcommittee hearing on temporary policy in the internal revenue code [Press release]. Retrieved from https://waysandmeans.house.gov/media-center/press-releases/thompson-opening-statement-select-revenue-measures-subcommittee-hearing
Turner, N. (2011). The effect of tax-based federal student aid on college enrollment. National Tax Journal, 64(3), 839–862.
U.S. Const. art. 1, § 7, cl. 1.
How to Cite
Unless otherwise noted, copyrights for the texts which comprise all issues of Higher Education Politics & Economics (HEPE) are held by the Journal. The compilation as a whole is Copyright © by HEPE, all rights reserved. Items published by HEPE may be freely shared among individuals, but they may NOT be republished in any medium without express written consent from the author(s) and advance notification of the HEPE editorial board. For permission to reprint articles published in the Journal, please contact the Editor-in-Chief.