by: John Purves

It has without a doubt escaped our USA’s lawmaker’s universe what cultural benefits have been created and formed by domestic tax policy and lawmaking throughout our country’s history. The right to vote, the right to bear arms, the right of free speech, the right of life, liberty and the pursuit of happiness (to name a few) all have driven cultural and socio-economic imperatives within our great country. They are as relevant now as they were then. Equally relevant today should be the right to attain a higher education. While it is possible to show each impact within both a micro and a macrocosmic view, I am taking this opportunity to discuss one aspect of needed tax reform and its future impact on the benefits in the pursuit of higher education.

In ancient times, those that held abundant natural resources could claim economic prosperity. Today, as history has revealed, those resources are typically plundered to the benefit of the better educated societies. Most assuredly it has been shown that education is the impetus to economic prosperity in the US. In fact, globalization of education as a means to prosperity has become a key driver in many developing countries. While not a perfect situation, these countries are on a path of economic prosperity at different velocities.

For the US, our prosperity has been managed to a certain degree by a dynamic tax code that collates a fair share from each of the participants each year and redistributes through the issuance of public goods and services. The management of education as a prosperity tool has not escaped the tax man. The Federal government for its part has attempted throughout many administrations to refine and make this tool of economic prosperity available to more rather than fewer. This has not been benevolence! Far from it! It is widely understood that the more an individual is educated the more he /she will most likely earn. It is also understood that the more an individual earns the more likely he / she will not need social services or hand outs. In fact, he / she will be paying or contributing more to sales, property, excise and income taxes in support of society. The government has also permitted additional incentives for some professions such as school loan forgiveness for those who wish to commit to underrepresented teaching, medically ministering to the underprivileged or those who agree to be ensconced within Native American populations for a time. It is believed this encourages those that would not have otherwise afforded an education will change their minds and commit to create a win win for both sides; building the tax base and diminishing the social service outflows.

The Rub

It is absolutely ridiculous that those families that commit to send their children or themselves to college are prohibited from claiming tuition interest expense once their income level reaches a certain level. Is a family that makes $40K per year who sends one person to college really worse off and thereby entitled to an interest deduction compared to a family that makes $108K per year and sends three people to school? I hardly think so! You can be sure that each family will borrow to some degree to make this part of the American Dream possible but each will financially struggle in some way.

It’s time for our lawmakers to offer yet another alternative. Allow full interest deduction for school loans but tie this to verifiable community service or volunteerism at higher family incomes. There are so many organizations that lack human resources that the advent of such a program can only end in success. Its administration can be easily effected with vouchers similar to the current 1099s and give each American family the choice…help our country by volunteerism or help our country by paying taxes. This change will more fairly distribute the tax benefits to those that are driving our prosperity.

John Purves received his MBA from Northeastern University and is VP of Development for Equities First Holdings LLC, a private lender- www.globalstockloans.com

Article Courtesy of :

Steve Pohlit, Business Development
Consultant