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1 Scott A. Hodge, Are Tax Credits the Proper Tool for Making Higher Education More Affordable 1 (2012)

handle is hein.taxfoundation/taxfaakf0001 and id is 1 raw text is: Are Tax Credits the Proper Tool for Making Higher Education More Affordable? Testimony by Scott A. Hodge President, Tax Foundation Hearing Before the U.S. Senate Committee on Finance July 25, 2012 Mr. Chairman and members of the Committee: I am Scott Hodge, president of the Tax Foundation. Thank you for the opportunity to speak to you today on the issues surrounding education and taxes. Founded in 1937, the Tax Foundation is the nation's oldest organization dedicated to promoting economically sound tax policy at the federal, state, and local levels of government. We are a non- partisan 501 (c ) (3) organization. For 75 years, the Tax Foundation's research has been guided by the immutable principles of economically sound tax policy that were first outlined by Adam Smith - taxes should be neutral to economic decision making, they should be simple, transparent, stable, and they should promote economic growth. In other words, the ideal tax system should do only one thing - raise a sufficient amount of revenues to fund government activities with the least amount of harm to the economy. By all accounts, the U.S. is far from that ideal. According to the National Taxpayer Advocate, tax complexity is the number one issue facing taxpayers and the IRS today. The main cause of that complexity has been the proliferation of credits, deductions, and preferences built into the tax code. Introduction Inequality is on the minds of many these days and it is commonly thought that the Bush-era tax rates are a principle cause. The reality is very different, however. One of the biggest contributors to rising inequality in America today is the growing earnings gulf between workers with college degrees and those without. Indeed, as can be seen in Chart 1, the median income for a worker with a 4-year college degree was $75,568 in 2010. By contrast, the median income for a worker with only a high 1

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