Sunday, February 05, 2006

Fun Tax Facts and Student Loan Burdens

by Tom Bozzo

In 2003, the most recent year for which data are available from the IRS, taxpayers whose returns reported less than $40,000 in adjusted gross income paid less than 10% of federal income tax. Note, I'm not suggesting that this isn't enough.

Keep that in mind, and read this from Brad DeLong, suggesting that replacing student loans with public funding for higher education would steal from the poor to give to the not so poor (for which, it should be said, DeLong has been getting a thrashing in comments). This runs the risk of obscuring the real reverse Robin Hood policies we get (see The Colbert Report).

My economist's take on funding higher education expenses with student loans is that they're a reasonable way of having students bear a portion of the cost of something that, on average, has significant private benefits (as DeLong notes); in that respect, they aren't inherently faulty as an institution. But insofar as there are also public good aspects to having an educated populace, it's possible to take a program of cost-shifting onto students too far, and end up with students choosing too little education on the basis of their private incentives — and state governments such as ours have been shifting costs onto students will-ye nill-ye, in Wisconsin apparently for no better reason than that college students are less politically potent than the corrections workers' unions.

Perhaps more to DeLong's point, given a choice between throwing a buck at public higher education, and throwing the same buck at public primary and/or secondary education, the latter may be a better and fairer choice — poor kids in public elementary schools need help more than middle and upper-middle class kids in public universities.

In an ideal world, which is to say one in which the Republicans didn't insist upon throwing away trillions of dollars on such projects as installing an elected theocracy in Iraq and tax cuts for the rich, it wouldn't be necessary to choose, of course.
It is, of course, a false dichotomy, and I'm rather uncomfortable that the Harvard undergrad declares his an economist's approach.

Pure public funding would have the effect of increasing the number of the "relatively poor" who could then opt for college (marginal increase--others would still "opt out" for familial, vocational, or other reasons). I rather doubt that the cost-benefit would hit hardest at the lower levels.

Full disclosure would note that I'm also an Ivy Leaguer (though I opted for Columbia over Purdue in part because the latter would have cost me more when the aid packages were compared), and that I've known Ray Davis for several years (though from the sf circuit, and primarily before he moved West).
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