Tax Policy Center: Education
Tax Policy Center reports on: Education - The Tax Policy Center is a joint venture of the Urban Institute and Brookings Institution. The Center is comprised of nationally recognized experts in tax, budget, and social policy who have served at the highest levels of government.

• Subsidizing Higher Education Through Tax and Spending Programs
  In 1997 Congress enacted a number of tax benefits directed toward helping middle- and upper-middle income groups meet rising college costs. This shift in goals and strategies raises concerns about the fairness and effectiveness of the evolving federal approach to higher education. This policy brief analyzes who benefits from the major direct spending program, Pell grants, and the three tax subsidies that most closely resemble grants, the Hope and Lifetime Learning credits and the deduction for tuition and fees. In addition, the brief assesses the potential impacts of these direct spending and tax programs on the affordability of college and the college-going rates of potential students.
• Education Spending and Changing Revenue Sources
  School districts in 37 states are "independent" and able to generate their own revenues, usually by setting property tax rates. Some school districts in other states are dependent on cities, towns or counties for funding authority. In addition, school districts have increasingly been dependent on state aid for funding.
• The Distributional Consequences of Federal Assistance for Higher Education : The Intersection of Tax and Spending Programs
  For nearly a decade, federal higher education subsidies have increasingly been delivered through the tax code rather than through direct spending programs such as grants, loan subsidies, and work study. This paper reviews the results of using new modules in the TRIM and Tax Policy Center microsimulation models to estimate the distributional impacts and expenditure and revenue effects of major federal higher education tax and spending policies. In addition, the paper reports estimates of the effects of some prototypical policy changes in the Pell Grant program as well as in the Hope and Lifetime Learning tax credits.
• High-Income Families Benefit Most from New Education Savings Incentives
  If funds from education savings plans are not used for schooling, the penalties more than offset the tax benefits for lower-income families. But higher-income families gain even if their children do not go to college. A new breed of tax-advantaged savings vehicle has emerged for the college bound. Earnings on both the federal Coverdell Education Savings Account (ESA) and the state-level 529 savings plan are tax-free if the funds are used for postsecondary education. One reason that the advantages of these education plans rise sharply with income is that that those with the highest marginal tax rates benefit the most from sheltering income. This brief explains how these new college plans work.
• Tax Credits and Grants for Undergraduates
  The nation's 16.5 million postsecondary students can receive financial aid that does not need to be repaid from federal and state governments, institutions, and other private sources. During the 1970s and 1980s as college costs increased dramatically, these grants tended to focus on increasing access to college for low-income students.
• Federal Financial Aid for Higher Education : Programs and Prospects
  In recent years, Congress has augmented traditional financial aid programs for higher education with tax-based subsidies. The tax subsidies can be very helpful to middle-income students who may not have been eligible for aid through traditional channels, but may be worth little or nothing to students from low-income families. This paper reviews financial assistance for higher education available through both traditional spending programs (grants, loans, and work-study) and tax assistance (credits, deductions, and tax-preferred savings plans). It summarizes recent research findings on the effectiveness of this aid and interactions among the various programs. It also discusses the role of future tax and fiscal policy choices in determining the level and nature of resources available for higher education needs.
• Subsidizing Higher Education Through the Federal Income Tax Code
  The Taxpayer Relief Act of 1997 expanded assistance for postsecondary education for low- and middle-income families with the creation of two new credits: the Hope Scholarship Credit (Hope Credit) and the Lifetime Learning Credit (LLC). Both are intended to subsidize the cost of attending school by allowing a portion of a student's expenses to be offset by a tax credit.
• State Fiscal Constraints and Higher Education Spending : The Role of Medicaid and the Business Cycle
  State governments have historically taken the lead in financing higher education. Over the past twenty years, however, state support for higher education has gradually waned, with the share of higher education expenditures subsidized by state appropriations declining. In this paper, we use state-level data on expenditures since 1977 to study the forces underlying the shift in state financing. More specifically, we examine interactions between state appropriations for higher education, other state budget items (especially Medicaid), and the business cycle.
• The Implications of State Fiscal Stress for Local Governments
  Recent reports suggest that between now and the end of fiscal year 2004 state governments' budgetary shortfalls will exceed $100 billion. To balance their budgets, states are planning large cuts in state spending. This paper explores the likely fiscal impacts of these budget cuts on local governments and school districts. Limited evidence suggests that states will enact substantial cuts in state aid and will shift responsibilities to local governments without transferring adequate resources. The paper also explores how local governments and school districts are likely to respond to sharp reduction in state resources.
• Use of State General Revenue for Higher Education Declines
  The current economic downturn is putting heavy pressure on state budgets. The National Conference of State Legislatures estimated that as states were drawing up their fiscal year 2003 budgets, more than a quarter faced deficits exceeding 10 percent of their general fund budgets. In response, many are sharply reducing appropriations - including those for higher education.