President Arthur Brooks discusses the importance of productive conversations across ideological lines and the right to hold different opinions through examining NFL players kneeling during the National Anthem.
An intimate girls’ night out with the celebrated champion of Islamic women’s rights. (She’s also our BFF.) Ayaan Hirsi Ali joins Danielle and Christina for the latest episode of The Femsplainers.
Edward Conard is a former Managing Director of Bain Capital and bestselling author. In this Conversation, Conard shares his perspective on why innovation is the key to America’s long-term economic vitality and how we can go about fostering it. To address what he describes as a shortage of properly-trained talent and risk-bearing capital, Conard calls for increasing high-skilled immigration and other public policies that match talent with opportunities. Conard and Kristol also reflect on the inequalities that are inherent in a technology-driven economy and consider what can be done now to benefit lower-skilled workers in the years to come.
Avalon GloboCare Corp. , a leading global developer of cell-based technologies, announced today that the Company has appointed Dr. Tevi Troy, Former Deputy Secretary of the U.S. Department of Health and Human Services, to its Board of Directors where he will also chair the governance and nominating committees. Dr. Troy currently serves as Vice President of Public Policy for Juul Labs.
The most problematic provision of the Tax Cuts and Jobs Act may be its 20 percent deduction for qualified business income of owners of pass-through businesses such as limited partnerships and subchapter S corporations. The deduction reduces the incentive for some pass-through businesses to take advantage of the law’s reduced corporate rate by converting to C corporations .
Home prices are booming. So far, 2018 has posted the strongest growth since 2005. “About 60% of all U.S. metros saw an acceleration in the rate of price increases through February this year,” according to Housing Wire. Since mid-2012, real home prices have increased 28%, according to data from the American Enterprise Institute. Entry-level home prices are up about double that rate. In contrast, over the same period household income has barely kept pace with inflation. The current pace of home-price inflation is increasing the risk of another housing bubble.
The root of the problem is declining underwriting standards. In April Freddie Mac announced an expansion of its 3% down-payment mortgage, the better to compete with the Federal Housing Administration and Fannie Mae . Such moves propel home prices upward. Because government agencies guarantee about 80% of all home-purchase mortgages, their underwriting standards guide the market.
Making lending even more dangerous, CNBC recently reported that “credit scores may go up” because new regulatory guidance allows delinquent taxes to be excluded when calculating credit scores. These are only some of the measures that “expand the credit box” and qualify ever-shakier borrowers for mortgages.
During the last crisis, easy credit led home prices to rise at an unsustainable pace, leading marginally qualified borrowers to stretch themselves thin. Millions of Americans’ dreams became nightmares when the housing market turned. The lax underwriting terms that helped borrowers qualify for a mortgage haunted many households for the next decade.
This spring’s teacher walkouts have spurred renewed attention to the question of teacher pay. The topic is a serious one, warranting the extensive reportage it’s received. At times, however, the media’s progressive sympathies, the allure of hard-luck tales, and concerted PR by teachers’ unions have yielded some questionable coverage. A recent case has been the spate of stories suggesting that teachers routinely reach into their own pockets to spend extraordinary sums on classroom materials.
“There is no other job I know of where the workers subsidize what should be a cost borne by an employer as a necessary ingredient of the job,” American Federation of Teachers president Randi Weingarten has thundered. Numerous recent stories have echoed her sentiment, repeatedly stating that the average teacher spends nearly $500 a year, unreimbursed, on school supplies. “The average teacher spends $479 a year on classroom supplies, national data show,” read a typical headline in Education Week. The Washington Post reported the same finding, in a story headlined “Teachers shelling out nearly $500 a year on school supplies, report finds.” A Time story explained, “Nearly all public school teachers report digging into their pockets to pay for school supplies, spending nearly $480 a year.”
Such claims make for attention-grabbing headlines. But, as with some of the other assertions made in the teacher-pay debate, they can be misleading. It’s less that the coverage is “wrong” than that it’s credulous and sometimes deceptive. So, let’s take a moment to clear things up.
The data in question are drawn from the 2015–16 National Teacher and Principal Survey, a nationally representative study of teachers and principals in public schools, conducted by the U.S. Department of Education’s National Center for Education Statistics (NCES). Using the survey results, NCES calculated average teacher spending for the 94 percent of teachers who said that they spent money out of pocket — excluding the 6 percent of teachers who did not report such spending, though the coverage frequently skips past that qualifier. (Including those other teachers lowers the average by about $30 a head.)
In reporting the “average” figure, news outlets have made the odd choice to focus on mean spending rather than the more typical median figure. There’s a reason most such data are reported in terms of medians (e.g., “median household income”). The median, after all, is the figure midway between the top and bottom of a distribution, meaning it represents the middle of the pack. A mean, on the other hand, can be dramatically moved by a few outliers. Including Warren Buffet or Bill Gates in a sample of average household income would make the typical household look much wealthier than it really is; similarly, a small number of teachers claiming big outlays can move the mean a lot. Indeed, NCES says that just one in five teachers reported spending more than $500, and the median teacher reported spending $297 — or about 60 percent of the widely quoted $479 figure.
Even these qualifications elide the real concern, however, which is the trouble with placing too much weight on a self-reported figure like this one. Journalists have generally ignored the problem inherent in asking respondents about how much they claim to do a good or noble thing. Self-reporting in such cases is highly susceptible to what social scientists term “social-desirability bias”: the tendency of respondents to say things that cast them (consciously or subconsciously) in a more favorable light. Studies show, for instance, that respondents substantially overestimate the number of days per week that they exercise, claim to watch the news three times as much as they actually do, and dramatically over-report their weekly worship-service attendance.
Now, let’s be clear. We are not suggesting that teachers are lying about their spending. But we are suggesting that, when teachers filled out the survey, precious few probably took the time to comb through twelve months’ worth of receipts and credit-card statements. Most of them probably guesstimated, and it’s safe to assume that their guesstimates tended to be on the high side.
We have no desire to diminish the real sacrifices many educators make, much less to deny that some teachers do indeed dig deep into their own pockets on behalf of their students. Spending even $100 or $200 per year out of pocket, especially for a teacher making $45,000 per year, is a big deal, and we don’t mean to suggest otherwise. But serious conversations about teacher pay should be informed by accurate data and careful analysis. Public deliberations about how much teachers should be paid, and whether raises ought to be funded by new taxes or cuts to other programs, are best served by reporting that meets that standard.
In an earlier Evidence Speaks post this year, Susan Dynarski and Judith Scott-Clayton summarized important research showing that federal tax benefits for college tuition have had no measurable impact on increasing college-going behavior. Moreover, they note that the benefits are numerous, overlapping and complicated. Yet for all their flaws, these tax breaks enjoy such strong support from lawmakers that even the oddest one, which quietly expires each year, is always revived in a last-minute bill just in time for the tax filing season. The tuition and fees deduction (“the deduction”) was recently extended for a seventh time in an omnibus budget bill in February. Out of all the tuition tax benefits the government offers, this one should be relatively easy to let go because of whom it unintentionally targets.
Here is how the deduction works. Tax filers can deduct up to $4,000 of tuition and fees paid for higher education in the tax year. It is an “above-the-line” deduction, meaning filers can claim it without having to itemize deductions. As a deduction, filers earn a benefit equal to their marginal tax rate. The maximum benefit any filer could extract from the deduction is $880, the top marginal tax rate of those who are eligible (22 percent) times $4,000. There is no limit to the number of times a filer can claim the deduction, so long as he has incurred tuition expenses, and it does not matter what type of credential he pursues. There is, however, an income limit. Taxpayers with adjusted gross incomes above $80,000 ($160,000 for joint filers) cannot claim it.
There is nothing odd about those terms per se, but they interact with other tax benefits the government offers for tuition such that only upper-income graduate students benefit from the deduction. First, undergraduates, while eligible for the deduction, don’t claim it because a different tax credit only for undergraduates is more beneficial: the American Opportunity Tax Credit, which is worth up to $2,500 in tax relief for filers earning up to $90,000 ($180,000 for joint filers). Tax filers can claim only one tuition tax benefit although they usually qualify for more than one. Second, graduate students with lower and middle incomes are also eligible for the deduction, but they can claim the $2,000 Lifetime Learning Credit, which almost always delivers a bigger tax break than the tuition and fees deduction. But the Lifetime Learning credit has a lower income cut-off than the deduction. Those earning over $66,000 ($132,000 for joint filers) in 2017 cannot claim it.
That’s how the deduction ends up targeting upper-income graduate students. While graduate students would always obtain a larger benefit from the Lifetime Learning Credit, they cannot claim it if they earn more than $66,000 ($132,000 for joint filers). They can, however, claim the deduction until their earnings exceed $80,000 ($160,000 for joint filers). Thus a narrow band of graduate students, those earning between the income limits for the two benefits, are the only students who would claim the deduction. At those levels, their incomes are higher than the incomes of about 80 percent of U.S. households. Of course, tax filers can unintentionally claim a less generous benefit if they are eligible for more than one, such as an undergraduate claiming the deduction when she was eligible for the American Opportunity Tax Credit, which does happen.
What the data say about eligible students
Using a representative sample of graduate students in 2011-12, Kim Dancy of New America and I estimated that just 8 percent of graduate students would benefit from the deduction. Meanwhile, 64 percent of graduate students would benefit most from the Lifetime Learning Credit. The rest of graduate students (28 percent) were ineligible for any tax benefit because they have no taxable income, their tuition was fully covered by grants and scholarships, or their earnings were too high. The analysis assumes that tax filers claim the benefit that provides them with the largest tax reduction if they qualify for more than one. These numbers have likely shifted in recent years, with even fewer students benefiting from the deduction, because Congress has increased the earnings cap for the Lifetime Learning Credit to account for inflation but left the limits for the deduction unchanged.
We also estimated the average benefit graduate students would claim through the deduction for the 2011-12 academic year. At $621, it was smaller than the $859 average benefit that filers eligible for the Lifetime Learning Credit could claim. Due to small sample sizes, however, we were unable to reliably assess important characteristics of filers eligible for the deduction, such as field of study.
The deduction didn’t start out as a graduate school tax break
As is often the case in public policy, lawmakers did not set out explicitly to provide a tax break to upper-income graduate students. In fact, graduate students were never the target group for the tuition tax breaks; undergraduates were always the focus. Although graduate students have been eligible for the tax benefits since their inception, changes to the policies over the years have left the deduction benefiting upper-income graduate students alone.
Prior to mid-1990s, the federal government did not offer widely-available tax breaks for college tuition. The idea first gained prominence when President Clinton proposed a $10,000 deduction for college tuition as part of his “Middle-Class Bill of Rights” reelection platform. After critics noted that a deduction would provide more help to families in higher tax brackets, Clinton added a separate tax credit for the first two years of college to his proposal to provide more even benefits. Congress adopted the president’s idea for the credit in 1997, naming it the Hope Tax Credit, but rejected the additional proposal for a $10,000 deduction. They instead replaced that proposal with a separate credit for “lifelong learning” (i.e., the Lifetime Learning Credit) that families could claim for education after the first two years of college, including graduate school.
Thus, President Clinton’s original idea for a deduction and a credit was replaced with two credits, the Hope Tax Credit and the Lifetime Learning Tax Credit. In keeping with their original purpose to provide middle-class tax relief, Congress capped income eligibility for both benefits at $55,000 ($100,000 for joint filers) in 1997.
With these two tax credits on the books, the idea of a deduction for tuition would be unnecessary and redundant, yet Congress later decided to add one anyway. Seemingly out of nowhere, lawmakers included a $4,000 deduction for tuition and fees in the Economic Growth and Tax Relief Reconciliation Act of 2001, the sweeping bill that included President Bush’s campaign proposal to cut marginal tax rates.
The deduction differed from the two initial tax credits in a key way, which partially explains why lawmakers added it. Families earning up to $80,000 ($160,000 for joint filers) would be eligible as of 2004. That was significantly higher than the income cutoff for the Hope and Lifetime Learning Credits at the time and would therefore offer tax benefits to families with incomes arguably well above middle class. But why not just raise the income limits on the existing credits then? Because creating the new deduction was a way to restrict costs relative to expanding the existing Lifetime Learning Credit in terms of forgone revenue to the government. Recall that the value of the deduction is worth the amount deducted times the marginal tax rate, which at the time it was created would have been $1,120 at the most. That is about half the maximum value of the Lifetime Learning credit.
In other words, the deduction was a way to let upper-income families into the college tax benefit club on the cheap. It also ensured their benefits would be smaller than those of the middle-class families, who were eligible for the credits.
At the time it was created, the deduction was as much an undergraduate benefit as a graduate one. Upper-income families would claim it for tuition paid in pursuit of either degree. According to my analysis referenced earlier, about the same share of graduate students as undergraduates qualified for it prior to 2009. But in 2009, Congress would make it pointless for almost any undergraduate to claim the deduction. That year, lawmakers replaced the Hope Credit with the American Opportunity Tax Credit, which provided larger benefits than the deduction with an income cutoff even higher than the deduction. With upper-income undergraduates now qualifying for American Opportunity Tax Credit, graduate students became the only group left who could benefit from the original tuition and fees deduction.
While Congress never decided to directly create a special tax break for upper-income graduate students alone, opting to extend the deduction year after year is effectively the same thing. The latest one-year extension, which made the deduction available for the 2017 tax year, cost the government over $200 million in forgone revenue.
At a time when an undergraduate education feels financially out of reach for so many families, it’s fair to ask why Congress continues to spend these resources on students who have already earned an undergraduate degree. Moreover, these students earn a median household income of $102,000, according to my analysis. There does not appear to be a good answer to that question other than inertia. Lawmakers have always extended the benefit so they continue to extend it. They may not realize, however, that it no longer benefits undergraduate students.
All of the tax benefits may be a policy failure for not increasing enrollment or being overly complex, but at least those for undergraduates put more money in the pockets of low- and middle-income families working toward their first degree. Today, the deduction does neither. It helps those who already have an undergraduate degree and earn high incomes to boot. While its cost in terms of forgone revenue are relatively modest, those resources would be better spent on aid that encourages students to enroll in and complete an undergraduate degree.
 Sue Dynarski and Judith Scott-Clayton, “The Tax Benefits for Education Don’t Increase Education,” Brookings Institution, April 2018, https://www.brookings.edu/research/the-tax-benefits-for-education-dont-increase-education/.
 Bipartisan Budget Act of 2018, Public Law 115–123, § 40203 (2018).
 Internal Revenue Service, “Instructions for Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits) (2017),” https://www.irs.gov/pub/irs-pdf/i8863.pdf.
 There are some circumstances when the deduction might produce a larger benefit than the Lifetime Learning Credit if a filer paid tuition and fees below $4,000 and he is in the highest tax bracket of those eligible for the deduction. For example, a filer in the 22% tax bracket who deducts $3,000 in expenses receives a $660 tax reduction; under the Lifetime Learning credit his benefit would be $600.
 Author’s calculation using the American Community Survey, 2016.
 Government Accountability Office, “Improved Tax Information Could Help Families Pay for College,” May 2012, https://www.gao.gov/assets/600/590970.pdf
 Jason Delisle and Kim Dancy, “Graduate Students and Tuition Tax Benefits,” New America, December 2015, 6–7, https://na-production.s3.amazonaws.com/documents/graduate-students-and-tuition-tax-benefits.pdf.
 Author’s calculation using the National Postsecondary Student Aid Study 2011–12. See also Jason Delisle and Kim Dancy, “Graduate Students and Tuition Tax Benefits,” New America, December 2015.
 William J. Clinton, “Address to the Nation on the Middle Class Bill of Rights,” December 15, 1997, www.presidency.ucsb.edu/ws/?pid=49591.
 Douglas Lederman, “The Politicking and Policy Making Behind a $40-Billion Windfall: How Clinton, Congress, and Colleges Battled to Shape Hope Scholarships,” Chronicle of Higher Education, November 28, 1997.
 Taxpayer Relief Act of 1997, Public Law 105–34 § 201 (1997).
 Taxpayer Relief Act of 1997, Public Law 105–34 § 101 (1997).
 Economic Growth and Tax Relief Reconciliation Act of 2001, Public Law 107–16 § 431 (2001).
 The top marginal tax rate for filers eligible for the deduction was 28 percent in the mid 2000s.
 See endnote 4. for an explanation of how sometimes when tuition and fees are below $4,000, tax filers can qualify for a larger tax reduction through the deduction than if the Lifetime Learning Credit.
 Jason Delisle and Kim Dancy, “A New Look at Tuition Tax Benefits,” New America, November 2015, https://static.newamerica.org/attachments/10416-a-new-look-at-tuition-tax-benefits/TaxCredits11.2.277d3f7daa014d5a8632090f97641cee.pdf; and Jason Delisle and Kim Dancy, “Graduate Students and Tuition Tax Benefits,” New America, December 2015, 6–7, https://na-production.s3.amazonaws.com/documents/graduate-students-and-tuition-tax-benefits.pdf.
 Joint Committee on Taxation, “Federal Tax Provisions Expired in 2017” (JCX-5-18), March 9, 2018.
 Author’s calculation using the National Postsecondary Student Aid Study 2011–12. See also Jason Delisle and Kim Dancy, “Graduate Students and Tuition Tax Benefits,” New America, December 2015.
The US economy added 223,000 jobs in May, up from 159,000 in April. The unemployment rate fell to 3.8 percent, and average private-sector hourly earnings increased 2.7 percent over the previous year. AEI experts are available to comment on the current state of the US labor market.
Resident Scholar Aparna Mathur notes:
“Lots of good news in today’s jobs report. Unemployment rate falls further, and wages are up. Declines in involuntary part time work, discouraged workers and long-term unemployed are all positive signs for the economy.”
For the full infographic on the May jobs report, click here.
Year after year, media note and sometimes bemoan the ballooning cost of higher education.
There are various reasons for surging costs, but the primary one is the remarkable expansion of university administration in recent decades. As Paul Campos, a law professor at the University of Colorado, wrote in the New York Times a few years ago:
Universities are large and require administrators to function, of course. The problem is there seems to be no end to the expansion. This point was recently illustrated by Mark Perry, an economics professor at the University of Michigan-Flint.
Perry, who also is a scholar at the American Enterprise Institute, used the University of Michigan as an example to highlight the rise of “diversicrats” (diversity bureaucrats) on today’s campuses. The numbers are astonishing.
- The University of Michigan currently employs a diversity staff of nearly 100 (93) full-time diversity administrators, officers, directors, vice-provosts, deans, consultants, specialists, investigators, managers, executive assistants, administrative assistants, analysts, and coordinators.
- More than one-quarter (26) of these “diversicrats” earn annual salaries of more than $100,000, and the total payroll for this small army is $8.4 million. When you add to cash salaries an estimated 32.45% for UM’s very generous fringe benefit package for the average employee in this group (retirement, health care, dental insurance, life insurance, long-term disability, paid leave, paid vacation, social security, unemployment insurance, Medicare, etc.) the total employee compensation for this group tops $11 million per year. And of course that doesn’t count the cost of office space, telephones, computers and printers, printing, postage, programs, training, or travel expenses.
If you fell out of your chair upon realizing that the University of Michigan has a full-time diversity staff of nearly one hundred employees, one of whom earns more than the president of the United States, you can be forgiven. I nearly did too.
The post The Diversity Staff at the University of Michigan Is Nearly 100 Full-Time Employees appeared first on American Renaissance.