When we think about the federal government and redistribution of wealth or "progressivity," we often think of either welfare benefits for the poor like food stamps and Medicaid or about the different tax brackets based on income. But it's worth remembering too, all the special tax breaks and credits that "phase out" once a taxpayer reaches a certain level of income. The Wall Street Journal has an article about President Obama asking Congress to make permanent something called the "American Opportunity Tax Credit," which offers a refundable tax credit for $2,500 a year in college expenses. Families can qualify for the full credit with "a modified adjusted gross income of $80,000 or less, or $160,000 for joint filers." At "$90,000 in modified adjusted incomes, or $180,000 for joint filers," it phases out completely.
So if your family saved for college or you worked and borrowed your way through and now earn more than $180,000 a year, you will now be taxed to help pay to put other people's children through college, while not getting any help from the government for your own children. This sort of thing doesn't get as much attention as the battle over the top income tax rates, but it's all part of the same big picture. To families in that over $180,000 range who are also being stuck by the colleges with the full sticker price of education while other families are getting tuition reductions as financial aid — a kind of private redistribution of wealth — this sort of thing adds insult to injury.
I'm not saying that there shouldn't be private scholarships or even government financial aid available to needy and deserving students, or that smart young people should be kept out of college because their families can't afford to pay. But at a certain point you start to wonder about the equity and incentives created in a system where a family earning $159,000 a year gets $10,000 (over four years) from the government to pay for college, while a family earning $181,000 a year gets no money from the government to pay for college while paying income taxes on the $181,000 that then get transferred to the $159,000-a-year family.
Of course, the $159,000-a-year family doesn't even get to keep the money — it winds up in the pockets of the liberal college professors who were among those who voted President Obama into office in the first place.