Tax credit an insufficient incentive

Thanks, Legislature, but no thanks.

House Bill 35, a measure that would create a tuition tax credit, passed in the Utah House of Representatives on Feb. 13 and unanimously passed the Utah Senate Education Committee yesterday. The bill will now be introduced on the Senate floor for a final vote.

H.B. 35 would create a tax credit equal to the amount a student pays in tuition every year. For example, a student who pays $4,000 in tuition would receive a $4,000 tax credit. However, the entire tax credit can’t be used at once. Every year, students can use their built-up tax credit to pay for 5 percent of their taxes. A student who has $500 in taxes can subsidize that amount with $25 from his or her tuition tax credit, leaving the remaining bill at $475. Every year, unused tax credit money rolls over, eventually amassing a decent amount of credit.

Even after graduation, students can continue cashing in on the accumulated tax credit as long as they continue paying taxes in Utah. The measure’s proponents hope this will be an incentive for graduates to work in the state.

But a 5 percent handout is far from an effective incentive. For college students, $25 isn’t going to go a long way. Even people paying $10,000 in taxes will still only be able to use $500 of their tax credit. That sounds like a lot, but for someone paying $10,000 in taxes, it isn’t any more than a $25 credit to students. Realistically, a 5 percent reduction in taxes can’t ensure graduates stay in Utah. A student who finds a better-paying job out of state could more than make up that difference. Instead of an incentive, the bill would become just a nice refund for those graduates who stay in Utah anyway.

Not to mention the money paying for the proposed tax credit would come from the education fund. Opponents of the bill have cited that it is good in theory, but could have a negative effect on public education.

There are worse things than an insubstantial tax discount, but H.B. 35 is intended to be an incentive, not a donation. If lawmakers really want to convince students to stay in Utah, they should consider a more substantial tuition tax credit. Otherwise, the money should be reinvested in primary and secondary education.

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