Closing the Loophole: Educational Tax Credit
It’s tax season, so it’s once again time to try and cook the books enough to get a little extra beer money from that return. Some of the most important tools that students have in their tax arsenal are the various educational deductions and tax credits, capable of wiping out most of the tax liabilities that we impoverished academicians carry around.
All you need to do is punch in the numbers over and over, in different iterations, and see what comes out. It is a pain in the ass, sure, but also a nice little spring ritual — not just testing various combinations of deductions to see which version of your fiscal self you will show to the government, but also the ritual of convincing yourself that all those government programs you love (i.e. UC Irvine) won’t be affected by your malfeasance. I can weasel my way out of paying taxes and still call the ambulance, right? Well, if President-elect Barack Obama’s administration can pull off what he promised, this season may be your last for this kind of activity.
During the campaign, Obama called for a new system of taxation for college students and their families. Gone would be those lovely, but convoluted tax credits and deductions, and in their place would be an up to $4,000 tax credit per student per year. No wrangling to see which deductions work best; no fretting about the fine print of a 1,000-page IRS document; no haggling with your tax lawyer about the definition of “criminal intent.” In short, it would be no fun for those tax-form junkies out there. But let them suffer; we need this.
As we all (hopefully) know, education right now is more important than it has been in decades. It is important, yes, for getting a good job, important for creating citizens who know and understand something about their country and the world and important for ushering the United States into the modern economic era. But promoting college education is also important for the more immediate recovery and growth of the economy, as well as for creating individuals who can deal with an immensely complicated world. We need education, and we need education that is available to anyone who is qualified, no matter the financial circumstances.
Some will say that we cannot afford this new plan. A college education is currently so expensive that the average graduate has more than $20,000 in debt by the time they graduate. Even the cost of public universities has gone up nearly 80 percent in just the last 10 years. In light of all these costs, what can the federal government do, especially during our current fiduciary crisis? Surely the government should buckle down and not take on any more programs than they have to, saving our tax dollars for more important matters, like anything the Pentagon comes up with. There is no money to be had, they say; just look at the budget crisis here in California. Where could we possibly come up with the money? How could we afford a program like this? The question should be: How could we afford not to?
In a time of crisis like this one, the ostrich approach to government spending just won’t work. As Nobel Prize-winning economist Paul Krugman has suggested in the past, government spending needs to increase dramatically in circumstances like this in order to inject crucial capital into the economic system. But this cannot be a hand-out to people who won’t use it; it must be a concerted investment in programs and people who will build the economy and the nation. Well, what better group of people is there to receive the beneficence of an approach like this than college students? Training and expertise are the name of the new economy and the new (old) diplomacy. We can’t afford to let a financial crisis shut down higher education, or we will never recover.
But the money must come from somewhere. We can’t just continue with rampant deficit spending and hope that the national tooth fairy will leave a $10-trillion bill under the pillow. When it comes down to it, what we are really talking about is tax reform. We need a tax code that is more progressive and rewards productive segments of the population, not just those trading in the illusion of production. Let Bush’s tax breaks for the wealthy expire. Implement a tax hike on those making enough to buy a yacht (they can afford it, seriously). Give a tax cut to working families who are scraping at the bottom of the middle class. And fund more college students. If there was ever a time in the last 60 years to do this, the time is now. We can turn the Shock Doctrine around; this time, in this crisis, we the people will get something back. And all we’ll have to give up is the joy of the tax dance.
Brock Cutler is a graduate student in the history department. He can be reached at email@example.com.