TUITION TAX RELIEF BILLS

FRIDAY, JANUARY 20, 1978

U.S. SENATE,

SUBCOMMITTEE ON TAXATION AND DEBT

MANAGEMENT GENERALLY, COMMITTEE ON FINANCE,

Washington, D.C.

The subcommittee met, pursuant to recess, at 9:30 a.m., in room 2221, Dirksen Senate Office Building, the Honorable Bob Packwood presiding.

Present: Senators Packwood, Roth, Jr., and Moynihan.

Senator PACKWOOD. The hearing will come to order. At this point we will insert in the record a statement by Senator Roth.

[The prepared statement of Senator Roth follows:]

STATEMENT OF SENATOR WILLIAM V. ROTH, JR.

Mr. Chairman, I regret that transportation delays prevented me from being here yesterday to hear the testimony presented by the Administration in opposition to my college tuition tax credit proposal. However, I have studied the written testimony and would like to briefly comment.

Frankly, I am shocked at the Administration's insensitivity to the plight of middle-income taxpayers. The entire thrust of this Administration seems to be to soak the middle-class.

Both the Treasury Department and the HEW Department made much of the recent Congressional Budget Office report which said college costs have not risen as fast as family income. The CBO report said that from 1967 to 1976 college costs increased 75 percent but median family income increased 88 percent. The Administration is therefore taking the position that families are no worse off today than they were 10 years ago and thus a tax credit is not necessary.

But the Administration is totally ignoring an extremely important fact—that the tax burden on the average family has increased substantially over this same period and middle income taxpayers have less disposable income to spend on a college education for their children.

Between 1967 and 1976, the tax burden on the average family increased from $1,214 to $2,397, an increase of 97 percent.

These figures include only federal income and social security taxes, and do not include state, local, and property taxes, which have also increased substantially over the past 10 years.

The basic fact is that the federal government is taking more money away from the average family in this country through higher taxes and inflation. The college tax credit is designed to reduce the average tax burden and allow taxpayers to keep more of their own earnings to spend on a college education.

The Administration also promised to study ways to expand the existing grant and loan programs. I totally reject the Administration's philosophy, which presumes that people's earnings belong to the state. The Administration believes taxpayers should be required to come to Washington to beg for a government grant financed by their own taxes. The Administration wants taxpayers to fill out forms, reveal their personal finances to a government bureaucrat, and plead poverty and prove they are needy enough to receive a small portion of their own money back.

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The Administration witnesses also discussed expanding the student loan an option I find incredible when they cannot even administer the existing loan program. In fiscal 1977, the federal government spent $448 million in interest and default payments on $1.5 billion in loans. One out of every six loan recipients defaulted on their loans, including 316 employees in the HEW Department. In fact, the New York Times recently reported that one of those who had defaulted was a $33,000 a year executive in Secretary Califano's office.

Mr. Chairman, as I have said previously, the time has come for the enactment of college tax credits. The Administration's last minute attempts to head off the tax credit will not succeed and I am confident it will be enacted into law this year.

Senator PACKWOOD. Our first witness today is Senator Hayakawa. Senator?

Senator Hayakawa is, of course, I think, without equal, certainly the most well-known educator in the Congress, House or Senate, today. Sam, we are delighted to have you here testifying on an issue of great importance to education generally.

STATEMENT OF HON. S. I. HAYAKAWA, SENATOR FROM

CALIFORNIA

Senator HAYAKAWA. Thank you, Mr. Chairman.

Mr. Chairman, I am delighted to testify here today in favor of proposals to provide tuition tax relief. As a former educator, I am interested in this approach to restoring consumer control over education. I must admit that I am more interested in supplying a tax break at the elementary and secondary levels of education, but there are certain aspects of college tuition tax relief which appeal to me as well. I would like to address these areas first, and then elaborate on the need for tuition tax relief for elementary and secondary education.

One of the major failings of our present system of financial assistance at the college level, as I see it, is its almost exclusive concentration on young, full-time students. The part-time student or the adult, evening student rarely receives any educational aid. But yet, as I look back over the best-remembered students in my years of teaching, those who remain most vivid in my mind are the adult, evening class students at Illinois Institute of Technology, the University of Chicago, and San Francisco State.

They were school teachers, firemen and policemen, business executives, nurses, at least two retired colonels, women starting a new life when their children were old enough to take care of themselves, men in their mid-thirties and forties contemplating a change of career. These mature adults have been my most exciting students. I've forgotten most of the kids. No doubt they have forgotten me.

Adult students are mature. They are, therefore, likely to be selfdirecting rather than dependent. They often have a reservoir of practical experience that is in itself a resource for further learning; and what they learn is not theory to be applied some day, but something to be used at once in their situations outside the classroom.

Today, there are in the United States more part-time college students than full-time students. That is a startling fact. This trend is likely to continue as more and more people discover that education is a life-long process. If we want to encourage this life-long learning, we should not provide assistance exclusively to young, fulltime students, but to students in all stages of life. We can do this by providing tuition.

tax relief to all students, or, more precisely, to all who pay for their schooling. I therefore strongly recommend to this committee that any tax relief provided for tuition payments be extended to part-time, as well as full-time students.

A second area of education which interests me is vocational education. Until recently, vocational education has received little public attention. This is probably a consequence of the contempt with which Our educational system views some kinds of work. It tends to overvalue white-collar work at the expense of other labor. Students believed to be low in academic talent are steered into "vocational" programs, while gifted students are steered away from them, as if they were too good to work with their hands or with machinery.

Such a distinction is arbitrary and invidious, inflicting an injustice both on the academically slow and on the academically gifted. Throughout all our high schools and colleges there should be maintained an active relationship between the academic world and the world in which people labor for a living.

I believe that our system of financial assistance for higher education should be neutral, biased in favor of neither academic nor vocational pursuits. Why should we encourage someone to study Latin and Greek as opposed to auto mechanics, typing, or shorthand? We shouldn't. We should let the individual make the choice independently of the availability of Government financial assistance. We can do this by providing tuition tax relief to both academically and vocationally oriented students.

Therefore, I think it is important that any tuition tax relief proposal reported from this committee apply equally to all types of education.

Finally, let me discuss what I believe to be the most important part of tuition tax relief-that provided for elementary and secondary education. I believe that public education at the elementary and secondary levels is approaching a crisis. Taxpayers have watched all levels of government quadruple the level of spending on education just since 1960. At the same time, the quality of education has shown no corresponding improvement. There is much public concern today about the deterioriation of public education at the primary and secondary levels.

Parents seem helpless to control their children's education. Teachers and administrators are often more interested in pleasing government. bureaucrats who control the funds, rather than parents who do not directly pay for their children's education. The structure of the system stands in the way of accountability to parents. There are instances where students receive their diplomas whether or not they can read or write, while their teachers and administrators receive their salaries and raises regardless of student performance.

I am particularly concerned about the quality of public education for the minorities and less fortunate in our country. It is widely recognized that the quality of public education available to blacks is inferior to that of the overall population. The typical bureaucratic reaction to this sad state of affairs is to recommend more school integration and busing, greater education budgets, and higher salaries for teachers.

I do not think more money and more busing are the answer. There is a great body of evidence that indicates that: (1) black students do not have to sit beside white students to learn, although it might be to the advantage of the white students to have that cultural exposure; and (2) high quality education is not necessarily dependent on large school budgets. There are better alternatives.

For instance, many black youths today have lower levels of academic skills than their parents who attended school when blacks were poorer and less free. It is also noteworthy that for years, many black parents have sent their children to Catholic and Black Muslim schools where per capita spending is much lower, but where the students acheive higher levels of academic skills than their counterparts in public schools.

Numerous specific examples of this phenomenon are documented in an article entitled "Patterns of Black Excellence," which appeared in the spring 1976 issue of the Public Interest. This article was written by a good friend of mine, Dr. Thomas Sowell, an economist now at Amherst College in Massachusetts, who, if it makes any difference happens to be black. I ask the committee to include this article as part of my testimony.

Senator PACKWOOD. It will be included.

Senator HAYAKAWA. Thank you.

Another enlightening article appeared recently in the Washington Post. This article focused on a Catholic school located in the Anacostia area of the District of Columbia. It is Our Lady of Perpetual Help Elementary School, which educates children from kindergarten through eighth grade. The school has 517 students, all of whom, except for 3, are black, and 42 percent of whom are Protestant. Annual tuition at the school is $330 for parish members, and $505 for nonmembers, who pay full cost. By comparison, the annual per pupil cost in the District of Columbia public schools is $2,000.

When you compare the levels of academic achievement of the students at Our Lady of Perpetual Help School and the public school students, the results are astounding. Although Our Lady of Perpetual Help spends about one-fourth the amount per student as the public schools, its level of academic achievement is much higher. Its students score at almost the national average in reading according to standardized tests.

For instance, eighth grade students at Our Lady of Perpetual Help read only 7 months below the national average, whereas District of Columbia eighth-grade public school students read 21⁄2 years below the national norm. The level of achievement of public school students in Anacostia is even lower. Mr. Chairman, I ask that this article also be included in the transcript as part of my testimony.

Senator PACKWOOD. It will also be included.

Senator HAYAKAWA. Mr. Chairman, national data show that it costs less to educate a student at a private school than at public schools. In 1974, private elementary and secondary students were educated at a per student cost of $1,191, as opposed to $1.281 in the public schools. In parochial schools, the average per pupil cost was $310 for elementary and $700 for secondary.

How can schools with a lower per pupil expenditure provide a better education? I think the examples cited above give us the answer to that

question. In all of the private and parochial schools where the students were performing better than their public school counterparts, there were several common characteristics in their approach to education: An emphasis on basic learning skills such as reading, spelling, and arithmetic; and insistence upon strict behavioral standards; and the consistent execution of disciplinary measures when necessary.

It is encouraging to me that so many parents have had the good sense to seek out a better education for their children. In Chicago, for instance, it has been estimated that 10 percent of all black children go to Catholic schools. I believe that to improve black education, as well as education in general, we need to restore parental control. As Dr. Walter Williams, a black economist at Temple University, writes:

To understand how blacks can be given more effective choice in education requires that we recognize that just because education is publicly financed does not require that it be publicly produced.

Mr. Chairman, today 5.3 million out of 49.5 million elementary and secondary school students attend private or parochial schools. Parents who send their children to these school pay double for education, once through their taxes and once in the form of tuition payments. As the cost of education increases, fewer parents have the financial flexibility to shop outside the public school for an education for their children. Their plight is complicated as inflation has eaten away at real personal income by artificially pushing people into higher and higher tax brackets.

Unless some sort of financial relief is provided to parents, essentially all children but those of the very rich will be forced to find their education in the public school system. As more and more private schools are forced to close their doors, there will be less and less competition for the public schools, and the quality of public education will deteriorate even further.

The future of our country depends on the quality of education we provide. This in turn, in my opinion, depends upon the existence of independent schools competing with public schools, and upon our making it possible for parents to choose the kind of education they want for their children. There is no reason why only the wealthy should have this choice.

I think tuition tax relief is an excellent way to provide the financial flexibility for parents to have alternatives. I am encouraged at the interest that has developed in this concept in the past few years, and I hope that the committee reports some kind of tuition tax relief bill, covering elementary through college education, to the Senate for its consideration. I thank the committee for the opportunity to testify on these bills.

Senator PACKWOOD. Senator, two of the points you made have been well illustrated personally by two witnesses who appeared in the last few days. The Congress on Racial Equality testified in favor of the tuition tax credit approach and gave some evidence of a school they have taken over and are running in the South Bronx, a school that had closed. It had been a Catholic school, and the Catholic Church could not afford to keep it open. They were desperate for money, so they had to close it.