If you’re Jean Charest, you’re probably starting to get antsy about the student strike jeopardizing the winter semester. But there’s actually a pretty simple way that the Quebec government could solve the impasse.
A few weeks ago, we explained how what universities charge (sticker price) is different from what students pay (net tuition), due to the multi-headed loan-and-bursary monster known as student aid. But loans and bursaries aren’t the only way to offset tuition – there are also billions of dollars of tax credits in our system as well. As my colleagues have explained elsewhere, real net tuition – once you factor in tax expenditures available to students – is actually 45% lower than the sticker price. Only nobody knows this because education credits only kick in months or years after students have left school.
So when tuition rises, students don’t actually pay anything like full freight – in fact, in Quebec’s case, students will be paying just 30 percent of the increase. For every dollar tuition rises, students will receive an extra 20 cents in tax credits from the Government of Quebec and an extra 15 from Ottawa. Of the $332 million that will be generated in new tuition revenue in 2016-17, students will therefore be getting $66 million returned to them in the form of a Quebec tax credit while Ottawa will kick in a $50 million increase in federal tax credits (is this fédéralisme rentable, or what?). On top of that, Quebec has already announced plans to kick back 35% of all new tuition revenue to low-income students via its bursary program. This will effectively freeze tuition for low-income students at a cost of $116 million.
(Actually, between the tax credits and the grants, low-income students will be better-off after the increase than they were before. Remind yourself of that next time you see a Quebec student leader spouting off on TV.)
Now, everyone who’s ever studied education tax credits has concluded that they are an inefficient way of funding education. Like tuition subsides, they have the same regressive distributional effects; unlike tuition subsidies, no one understands them.
So here’s an idea: why not just cut the Quebec tax credit a bit instead? It’s a $66 million piece of the fiscal puzzle that literally no one gives a damn about. So why not cut the rate and use the proceeds to roll back the tuition increase somewhat. Students will pay less up front, allowing their leaders to save a little bit of face, declare victory and move on. Universities will get the same badly needed funds, and the feds will still kick in 15 cents for every dollar of tuition increase that occurs.
Facile, n’est-ce pas?