As it appears the pressure is on to vote for the ridiculous tax cuts currently proposed, I would like to offer an alternative suggestion.
I would suggest that, rather than spend several hundred billion dollars on a dividend-tax-reduction scheme, Congress instead focus on ensuring that higher education is truly affordable for everyone who seeks to pursue a higher education degree. While various tax credits, subsidies, and grants exist (see the IRS for more info), a cleaner, simpler system should instead replace the current tangle of tax credits and income reductions, with an expanded grant system to subsidize higher education for low-income students and their families.
Currently, anyone filing a tax return, for his/her self, spouse, or other dependent, can, if the filer does not meet any other credit criteria, claim an adjustment of up to $3,000 against gross income (through 2005). This adjustment should immediately replace all the existing tax credits and restrictions, allowing any individual to take an adjustment to gross income up to the full amount he or she paid during the given year. In addition, if both a legal guardian and a dependent paid a porportional amount, both should be allowed to deduct against gross income the amount that each paid. In addition, if a corporation or other institution provided money, the institution should also be allowed to deduct the full amount of the higher education funding provided. In the event that the amount paid (combined with other credits and adjustments) reduced taxable income a negative value, the additional loss should be allowed to be carried over to the following year, to count as an adjustment against future taxable income (much as stock losses exceeding $3,000 are allowed to carry over).
A tax credit for non-itemizers, in the amount of $500 per semester, indexed to inflation, should be made available. For those whole file itemized returns, the costs of books, supplies, and other reasonable expenses relating to educational study should be deductable. Off-campus students should be allowed to deduct any mileage encountered as part of their commute.
The existing Federal loans and grants program should be enhanced to ensure that among those students wishing to pursue higher education that live below the minimum “living wage” value for their region should receive at least 75% of their higher education expenses covered by federal grants, rather than through loans. The lower- and middle-income families should receive automatic grants, according to a tiered process, that would offset some of the growing financial burden of higher education.
Higher education is a major investment for both the individual and society, and both accrue the benefits of a well-educated population. Ensuring that the double taxation on education is eliminated should be a major goal, as well as ensuring that no individual should be denied entry on the basis of affordability. After all, the class mobility that defines America depends on this remaining true.