The Ins and (a lot of) Outs for Obama's College Tuition Credit

Mr. Obama proposes affordable higher education for anyone that wishes to attended a college or university. For that reason, he proposes a fully refundable tax credit against the first $4000 of any yearly tuition for a college education. Anyone receiving such a credit only has to commit to 100 hours of community service. Assuming a 40-hour work week, that could be as little as 2-1/2 weeks of service.

Certainly, his plan sounds good to all those who wish to go onto higher education. But, if you start looking between the sheets on this one, you might be left with a lot of questions. I sure am.

First, let's simply look at the "title" that Mr. Obama has assigned to his plan. He calls it the "American Opportunity Tax Credit." Right off the bat, the title implies that whoever receives it is paying taxes. After all, it is called a tax credit. Further, it says the recipient of this credit gets it with the condition of completing community service. Taking these two things together, am I to assume that only students who are working and paying their "own" way through college would be eligible for this credit? Certainly, if Dad or Mom is paying the bills, that parent couldn't get the credit, because to do so, would mean him or her putting in 100 hours of community service time instead of the student.

My real guess is that this "tax credit" is a lot like another "tax credit", the Make Work Pay Tax Credit, where you don't even have to pay income taxes to get the credit. You know...his famous "spread the wealth" tax credit plan. This one, too, smells a lot like that one. Like the other tax program, both should really be called the "Work a Little and Get a Lot" tax plan. If I am right, any student who puts enough work in to generate a "reported income" statement to the IRS will be eligible for the credit. The only burden on the part of the student is that they have to file a 1040, and then put in their community service time.

Further, I'll bet that there will be a complete disconnect on the part of the IRS as to who is really paying the tuition bill. My guess is that if the Mom or Dad is wealthy and is paying the bill, the student will still get the credit. What's worse, if there truly is an IRS disconnect, the parents will be able to grab their own deduction under the current tax laws. In a way, this could be the epitome of double dipping. Further, any students getting completely un-bonded or non-refundable grants or scholarships will be the best off because this will be pure profit for them since students in this category aren't really paying any tuition.

Additionally, who's going to verify and administer those 100 hours of community service? The IRS? And, what kind of community services qualifies? I'll bet ACORN is part of that calculation! This part of Mr. Obama's plan just seems like another bureaucracy builder. A bureaucracy to verify and a bureaucracy to run all these qualified "community service" programs. Either way, it will be a bigger form of government.

Certainly, I'm doing a lot of "worst case" speculations about Mr. Obama's plan. However, quite often, our government manages to implement programs that seem to fulfill all the "worst case" nightmares. My guess is that this won't be any different! Just my humble opinion.