Question

suppose the government wants to increase the ability of families to pay for college education, and the government is considering two policy tools, one is a $500 income tax rebate, and the other one is a $500 tax credit for tuition reimbursement (namely, a $500 tax credit would only be received if the family spent $500 on tuition). Please answer the following questions. Which policy tools is more effective in terms of driving up the demand for college education? In addition, which policy tools is likely to make families better off, as measured by a higher level of utility or happiness? Please explain why?

Answer 1

Tax credit for tuition reimbursement is more effective policy for boosting up or driving up demand for college education.because tax credit is allowed only when tution fees is paid .while income tax rebate is not more beneficial then tax credit .Tax credit of $ 500 policy tool is likely to make families better off as measure by happiness and a higher level of utility.because by getting $ 500 people's income enhance by this amount and this will encourage them to spending more in education.