Why Democrats Love Tuition Tax Breaks

In the years since the Clinton administration first championed the Hope and Lifetime Learning Tax Credits, every successive Democratic presidential nominee has pushed his own tuition tax cut plan on the campaign – each more generous than the last.

What accounts for the Democrats’ love affair with tuition tax breaks? Is it because they believe that this is best possible public policy? That’s unlikely as there is little evidence to suggest that the availability of these credits has changed students’ college going behavior. In fact, research shows that because the tax credits arrive months after students and parents pay their tuition bills, many families don’t even realize that they have received help from the government to pay for college.

“Tax credits don’t make or break their children’s decision about attending college, and unlikely to even affect where they attend or how long they take to finish,” student aid expert Sara Goldrick-Rab of the University of Wisconsin recently wrote. “Instead, they operate as a sort of ‘reward’ to the family for having a college-bound child, and a little ‘apology’ for the high costs. Of course, these are nice things for the government to do for families, but since they don’t change student outcomes, they simply aren’t necessary.”

The Democrats’ affection for these programs is not about policy, it’s about politics pure and simple. For the politicos, this is a no-brainer, considering that tuition tax breaks poll phenomenally well with families worried about ever-rising college prices.

But don’t take my word for it. Check out this 2009 memo from the New Democratic group the Third Way urging progressive groups to get behind President Obama’s American Opportunity Tax Credit (AOTC) proposal. Citing a poll it commissioned showing overwhelming support among parents (and other demographic groups) for tuition tax cuts, the organization said that championing the AOTC could pay huge dividends for Democrats for years to come – by sending “an important signal that progressives understand middle-class priorities and the value Americans place on getting their kids through college.”

The memo lays out the political calculus very clearly:

As progressives, we consider ourselves the champions of the middle class. But if the results of past Congressional elections are any indication, the middle class has not returned that embrace.

The 2008 elections marked the first time in 14 years that Democrats swept the middle class. In the six Congressional election cycles between 1994 and 2004, the middle class supported Republicans over Democrats every time. In the 2004, Congressional races, for example, the low end of the middle class ($30,000 to $50,000 in household income) supported Democrats by a slim 4-points, but Republicans won the heart of the middle class ($50,000 to $100,000 in household income) by a staggering 10 points.

The progressive hold on the middle class is tenuous, and securing their long-term loyalty and attention requires that progressives understand and respond to middle-class concerns and needs…A generous college tuition tax cut – by speaking effectively to both middle-class aspirations and anxieties – can help cement the bond between progressives and the middle class.

Of course, as a new report that we released at Education Sector last week shows, the Democrats have not just been trying to win over the middle class. In recent years, the tens of billions of dollars that the government through the tax code are increasingly going to upper middle income families who are more able to afford sending their children to college without the help. These families also happen to be among the most likely to vote.

At a time when Congress is struggling to fund the Pell Grant program and financial needy students who pursue a higher education are facing mountains and mountains of debt, policymakers need to refocus the government’s resources on its core mission of eliminating the financial barriers that prevent low–income and working-class students from enrolling in and completing college.

Instead of making further cuts to Pell eligibility, reducing grant amounts, or eliminating interest subsidies for student loan borrowers, Congress should eliminate the tuition tax break programs and use the savings to ensure that the Pell Grant program remains on a sustainable path. If lawmakers insist on maintaining the tax breaks, they should at least scale them back so that they are helping only those who truly need the assistance – low-income students and lower-middle-income individuals and families that just meet the cut off for federal need-based financial aid.

Either way, Democrats in the White House and Congress will have to be courageous enough to tell their pollsters to take a hike.