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Cited by 20Politics, Economics, and Education PolicyHigher Education Research StudiesEconomic and Fiscal Studies

The Returns to the Federal Tax Credits for Higher Education

Open access
Bulman, George, Hoxby, Caroline·2015·National Bureau of Economic Research
DOI 10.3386/w20833
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Abstract

Three tax credits benefit households who pay tuition and fees for higher education.The credits have been justified as an investment: generating more educated people and thus more earnings and externalities associated with education.The credits have also been justified purely as tax cuts to benefit the middle class.In 2009, the generosity of and eligibility for the tax credits expanded enormously so that their 2011 cost was $25 billion.Using selected, de-identified data from the population of potential filers, we show how the credits are distributed across households with different incomes.We estimate the causal effects of the federal tax credits using two empirical strategies (regression kink and simulated instruments) which we show to be strong and very credibly valid for this application.The latter strategy exploits the massive expansion of the credits in 2009.We present causal estimates of the credits' effects on postsecondary attendance, the type of college attended, the resources experienced in college, tuition paid, and financial aid received.We discuss the implications of our findings for society's return on investment and for the tax credits' budget neutrality over the long term (whether higher lifetime earnings generate sufficient taxes to recoup the tax expenditures).We assess several explanations why the credits appear to have negligible causal effects.

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Each is checked against this paper’s own text: does it say what the citing paper says it does?

  • The tax credits and deduction have no effect on college enrollment.

    “They find that the tax credits and deduction have no effect on college enrollment.”

    From College Costs, Financial Aid, and Student Decisions (2022) · cites this paper as Bulman and Hoxby (2015)

    Section 6.2 reports that the AOTC produced very little change in college attendance, and Section 8 describes the tax credits’ effects on college-going as meager. The claim overstates those findings as a definitive absence of any effect and includes a deduction whose effect on enrollment the cited passages do not assess. (LLM, conf=0.88)

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Cites

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Research works printed but not linked: 2

  1. Dynarski, Susan M., and Judith E. Scott-Clayton. 2006. "The Cost of Complexity in Higher Education: Lessons from Optimal Tax Theory and Behavioral Economics," National Tax Journal, 59 (2): 319-356.
  2. Long, Bridget Terry. 2004b. "The Impact of Federal Tax Credits for Higher Education." in Hoxby, Caroline M. (ed.), College Choices: The Economics of Which College, When College, and How to Pay For It. Chicago, IL: University of Chicago Press, 101-168..

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Authors
Bulman, G., & Hoxby, C.
Affiliations
  • University of California, Santa Cruz (US)
  • Hoover Institution (US)
ORCID
Hoxby, Caroline
Venue
National Bureau of Economic Research
Publisher
National Bureau of Economic Research
Published
2015-01
DOI
10.3386/w20833
OpenAlex
W3121329468
Cited by
20
References
17
Citations by year
2023: 1 · 2022: 2 · 2021: 1 · 2020: 2 · 2019: 1 · 2018: 2 · 2017: 3 · 2016: 5 · 2015: 3
Type
report
Language
en
Open access
Locations
  • National Bureau of Economic Research (publishedVersion)
  • RePEc: Research Papers in Economics (submittedVersion)
  • SSRN Electronic Journal (submittedVersion)
Funders
U.S. Department of the Treasury
Topics
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Politics, Economics, and Education Policy
  • Social Sciences › Education › Higher Education Research Studies
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Economic and Fiscal Studies
Keywords
tuition tax credits, college choice, college financial aid, tuition fees, returns to education, lifetime earnings, tax expenditures, budget neutrality

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