14 Ways the Tax Code Subsidizes Higher Education

Adam N. MichelThe federal government subsidizes higher education through a multitude of grants to universities, subsidized loans, and direct scholarship funding. In addition, the tax code includes at least 14 different programs that distort the education system and complicate tax filing. All told, the tax code subsidizes higher education to the tune of $322 billion over ten years.From an education policy perspective, the accumulation of all this federal spending has a distorting effect. Over time, the subsidies havelikelycontributed to thehigh price of college as subsidies increase demand, which drives up prices. This cycle then drives significantstudent debt burdens and demand for additional government subsidies.From a tax policy perspective, the tax treatment of higher education is an example of the seemingly infinite complexity and inefficiency of the tax code. Table 1 at the end of this piece summarizes 14 different such provisions across the tax code. On their own, each provision ’s rules and structure are designed for some specific policy goal or political constituency. When added together as a system, the education tax programs illustrate one of the problems with using the tax code to subsidize one activity over another—it often ends up being an incoherent mess that co mplicates a system designed to raise revenue, not fund college degrees.Congress should repeal all the tax subsidies for higher education and expand the treatment for education savings to all savings....
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs