How can workers adapt to a constantly changing labor market and the oncoming threat of automation? One of the suggestions researchers and policymakers have is to go back to school and acquire new skills. As my colleague Derek Thompson wrote recently, “Making it easier for adults to attend college part-time is crucial if, as the White House has claimed, the U.S. economy [actually] suffers from a ‘skills gap.’” But the latest Republican tax plan, which passed in the House, would make it more difficult for many of these workers to tap into precisely the types of education and training they have been told they need.
The House Republican plan, which was unveiled earlier this month, would repeal the Lifetime Learning Credit (LLC), a 20 percent tax credit on tuition expenses at any eligible postsecondary program up to $10,000 for those who make $65,000 or less (or $130,000 or less for married couples filing jointly). Over 4 million tax filers claim the LLC annually, saving them about $2.6 billion a year.
Gutting the LLC wouldn’t completely eradicate tax credits for students. The LLC has a counterpart, the American Opportunity Tax Credit (AOTC), which the tax plan would not scrap. About 10 million people utilize the ATOC, saving them $17.5 billion per year. Only students going to school at least half-time, in their first four years of postsecondary education, whose income is less than $90,000 (or $180,000 for joint filers) are eligible for the credit. While the AOTC’s higher income cap captures more of the population, the credit’s limits on years of postsecondary study mean that it won’t be accessible to many who need longer-term retraining programs. To mitigate some of the damage done by repealing the LLC, the Republican tax bill offers to extend eligibility to a fifth year to serve some of those who would have been served under the LLC, but would offer them only half as much as what they’d get for the first four years.