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Wednesday, October 27, 2010

Tax credits for education is too much

“White House pushes to extend college tuition credit”
This article notes the need for continuing a tax credit for college students. The credit allows people to receive some money that they paid for in tuition back when they file their taxes. This is essentially a grant that the government is giving people to go to school. School is expensive and this helps the payers of the tuition recoup some costs. These tax credits lower the price level for college tuition and increase the quantity of people that can afford school. This will lower the value of higher education and decrease the value of people with college degree. In this class we consistently discuss efficient quantities of goods; therefore I feel there should be an efficient quantity of people without degrees so other degree holders can have greater value in the job market. The market effect of the numerous higher education breaks and grants create a market place with too many degrees and not enough unskilled or uneducated labor. While looking at this idea it seems that while combining the greater quantity of degrees with the minimum wage laws the United States has begun pricing its labor force too high to produce goods of lower value. Under the current tax credit a student receives up to $2,500 a year in incentives to go to college. A full time student at UCCS receiving COF only pays 8-10 thousand dollars a year. Considering the credit the government has given the student somewhere around 25% of their college tuition back, as long as they have paid that in taxes.
Does this credit fix a market failure? I argue no, instead it could lead to slower growth in the economy. “The world needs ditch diggers too.” This common cliché may reveal the problem. With so many degrees the government could be reducing the efficient quantity of lower skilled/education level jobs. I am not completely sure about this but with my graduation soon approaching I would like to know that there are too few degree holders in the market place and not too many. From selfish perspective I would like to see all government incentives removed from higher education, but there is benefits to living in a society where education is valued so highly.

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