Speed Gibson

During the Vice Presidential debate, Senator Edwards said they would give the middle class additional needed tax cuts. But we later heard that much of it was in tax credits, such as up to $4,000 for college tuition. This is a pet peeve of mine, the so-called "targeted tax cuts" offered by Democrats and even a few Republicans.

Work it out. Let's say you get a $4,000 refundable tuition tax credit to send your child to a local college at $6,000 per year. Compare this to a subsidy program that pays $4,000 to such colleges for each such student. Let's look at the bank balances - yours, the college's, and the government's.

1. If you decide not to take advantage of the program, you get nothing, the college gets nothing, and the government still has the $4,000.
   
2. If you do send your child to the qualifying school, you might get to look at the $4,000 briefly, but you soon sign it over to the college. You're down $2,000 (the difference), the college has $6,000, and the government is down $4,000.
   
3. If it were a subsidy, the $4,000 would be paid to the college directly and you pay the other $2,000. Again, you're down $2,000, the college has $6,000, and the government is down $4,000.
   

Point one shows that this isn't truly tax relief, which is where you get your own money back. Points two and three show that "targeted tax cut" and "subsidy" produce the same ending bank balances and educational outcome. Therefore, this simply is a spending program. It just happens that the paperwork flows through your house, perhaps to make you feel good about the program.

So remember, tax "cuts" that depend on you spending money in a specified way are not tax cuts. These "targeted tax cuts" are as easily implemented for what they truly are: spending.