Democratic Senate candidate Mark Dayton has called for tax deductions for college education to help families bear rising college tuition costs. Although his proposal requires some scrutiny, any sort of deduction would have a positive effect on families striving to provide their children with a quality education. The actual feasibility of incorporating this tuition deductibility into the tax code, though, is a long way off. The Dayton college tax deduction campaign — like many of his proposals — is offering few details.
If Dayton’s proposal became law, a new line would appear in federal 1040 tax forms, meaning families who take standardized, rather than itemized, deductions may still benefit from Dayton’s plan. The deduction would only cover tuition and books, though, and no so-called out-of-pocket expenses like housing or spending money. Any grants a student receives would not be deductible either. The Dayton campaign does not envision any reason why his proposal would adversely affect grants and loans, though campaign officials do admit that whether the tax deductions reduce aid awards would be determined by each individual student funding institution. The tax break could even reduce a student’s financial aid package.
The deduction’s size would depend upon each family’s income. To ensure the tax break goes toward those who need it the most, families making $90,000 or more would receive smaller deductions, and those earning $120,000 or more would be ineligible for the deduction.
When asked where the money would come from to pay for such a program, the Dayton campaign responded that money from the federal budget surplus would be used. This is a risky idea. The projections from the Congressional Budget Office are just that, projections. When the CBO prepares the federal budget forecast, it must assume that some programs renewed yearly are no longer receiving funding. It must also assume that the country’s current prosperity will continue indefinitely, leading to an extraordinarily high figure that might not be representative of the actual budget when it arrives.
Dayton is taking a risk with his initiative. Many see an increase in taxes if his plan is implemented. They are right to worry. If surplus money cannot be used, or simply is not there, and this deductibility is written into law, then money must be taken from somewhere. It would be simplest to raise taxes to cover these costs. This would be unfortunate, as it would literally mean that the higher taxes families would pay would provide the revenue to fund their tax deductions.
If Dayton is elected into office in November, he should take a long, hard look at his proposal and balance it against the reality of the situation before he decides if he really wants to pursue the plan. The cost of tuition is rising, but a careful and well thought out plan should be implemented to bring the price of a college education down, not a scheme that could ultimately backfire on families.