Study finds tuition tax breaks help poor least
Families with low incomes do better with college grants
College tuition tax credits are benefiting wealthier U S taxpayers more than the poorest, a federal study concluded , based on tax records, in the first analysis of the nine-year-old program.
The federal credits are saving an average of $700 in taxes for families earning $92,000 or more, and $600 for families earning less than $32,000, the Education Department's National Center for Education Statistics said in a report.
The findings confirm warnings about the program when it was enacted in 1997, said Kenneth Redd, director of research and policy analysis at the Council of Graduate Schools, which represents about 470 colleges in the United States and Canada.
``The critics of these kinds of credits have said, `Is it right to use scarce resources on people who may not have the most need for it?' " Redd said. ``But at the same time, higher income families have financial need, because the cost of college is very high."
The report, based on 2003-04 figures, found that low-income families do better overall with federal college assistance. Counting tax breaks and a variety of federal grants, families earning less than $32,000 get an average benefit of $3,300, while those earning more than $92,000 get $800.
Also, those in middle-income ranges do better from the tax credits than either the highest- or lowest-income families, the NCES said. Those earning $32,000 to $59,999 claimed an average credit of $900, while those earning $60,000 to $91,999 claimed an average of $1,100, it said.
The NCES study examined the effects of two programs from 1997 -- the Hope Scholarship, which allows a tax credit of up to $1,500 during a student's first two years in college, and the Lifetime Learning Tax Credit, which allows a tax credit of up to $2,000 for lower- and middle-income students after the first two years.
In both cases, the credit is based on need, so that families with higher incomes get less than the maximum benefit. Yet the credit becomes meaningless for the lowest-income families, since general tax breaks leave them owing nothing to the government anyway, Redd said.
``If you don't have any tax liability, obviously you can't get a tax credit," he said.
The credits are phased out starting when family income reaches $43,000 a year, or $87,000 for married couples filing jointly. It's eliminated completely at $53,000 or more, or $107,000 for married couples filing jointly.
