Tax credit programs allow those applicable for a credit to subtract the value from their annual tax payment, or claim it as a deduction. So if you were required to pay $5,000 in taxes this year and you received the $4,000 tax credit that Obama proposes for students, you would only have to pay $1,000 in taxes. Many politicians, including Obama, favor providing tax credits to college students in exchange for public service. However, some college administrators state that tax credit programs force an increase in overall student tuition.
Obama wants to increase tax credits, McCain states he wants to simplify them, but by simplify, does he mean eliminate? Find out in Part 2 of Mason Votes series on College Affordability.
Obama’s plan includes a fully refundable credit of $4,000, which he says will cover “two-thirds the cost of tuition at the average public college or university.” Students who take this credit will be required to conduct 100 hours of public service a year. For comparison, George Mason University’s in-state tuition in 2007-08 came to $6,840 while out-of-state tuition was $19,728.
In 2009, legislation will raise Virginia’s minimum wage to $7.25. At that rate, it would take over 550 hours to earn the same amount as Obama’s $4,000 tax credit. Virginia’s average weekly wage in 2007 was $901 (that’s 10th highest in the US). If you were to work 40 hour weeks at this rate, that means around twice as many hours to earn that $4,000 then you would need doing public service under Obama’s plan.
If you thought that was confusing, you’re not the only one. McCain says he seeks to simplify tax benefits.
“I can ensure that a greater number of families have a lower tax burden when they are helping to send their children to college,” states McCain in his website’s higher education plan.
By simplify, McCain may mean eliminate. He voted against tuition credit created to cover college costs and provide tax credit incentives for teachers in 2000 (RC #182). He also voted against the Hope Scholarship Credit, meant to decrease overall attendance costs for disadvantaged children, in 2001. In both 2001 and 1999, McCain voted against making college tuition a tax deductible expense.