First, Tax Credits provide a direct and, therefore, less costly method for providing assistance to middle-income students. Colleges and universities have noted significant administrative costs associated with the present financial aid programs. Tax Credits would impose no such overhead costs, either in the Office of Education or in institutions of higher education.

Second, Tax Credits offer a means to assist students without the imposition of additional controls and regulations. Congress is obligated to insure a proper expenditure of public funds, and it is a necessary condition that there be rules, regulations, and controls imposed upon recipients of such funds. At the same time, American colleges and universities guard jealously their autonomy and prerogatives for self-control and governance. Therefore, support in the form of Tax Credits rather than Governmental appropriations would be less likely to require controls which are seen by colleges and universities as interference in internal matters.

I hope you will find these arguments persuasive and that you will consider giving your support the Senator Roth's Tax Credit proposal.

Sincerely,

E. A. TRABANT.

Senator ROTH. Thank you. We certainly thank you for your excellent testimony.

Senator MOYNIHAN. You are going to have difficulty holding me to 5 minutes, Mr. Chairman, because this is a great pleasure. Dr. Eggers is not just a distinguished educator, but an important scholar in the area of political economy, and when he says there is an underrepresentation of a stratum of the population, it should be attended to. He knows what he is talking about.

The variation you suggested on the Packwood-Moynihan bill is an interesting one. We will try to get it costed out, but I would like to speak to you on this point of the opposition from the Government bureaucracies. If I may refer to it as "The Thing," the Thing is against this legislation because the Thing would not control it.

I said 2 days ago that we would try to demystify some of these questions. The reason the Thing is against this is because it would not have a single bit of power. The Thing would get nothing from this program. Therefore, it would not want it, in the same way it does not want those other schools that it does not control. It has come to the point of being pathologic.

I spoke to the Secretary of HEW about this last night, and said, How could we have an education bill before the Senate, 50 Senatorswell, with the death of Senator Humphrey, 49-and not even have a senior education official of the executive branch come to testify on it? One-half of the bill passed, what was it, 82 to 9?

Senator ROTH. The college tax credit has passed the Senate three times in the last 18 months, most recently by a 61-11 vote.

Senator MOYNIHAN. We had the whole social security system held up on this matter. It is clearly something the Senate intends to do. The House has said it would do it, that it would respond somehow, and yet "The Thing" could not even send an educational officer, those idle educational officers who have nothing to do themselves, to come to testify, because it hates this. It moves away from its increasing control in what Schumpeter called the conquest of the private sector by the public sector.

Do you recognize what I am talking about, sir?
Mr. EGGERS. I have lived with it.

Senator MOYNIHAN. You are one of the few remaining unconquered enclaves, and you must be hateful to their sight.

[General laughter.]

Senator ROTH. Will the Senator yield?

Senator MOYNIHAN. Certainly.

Senator ROTI. One of the things that concerns me about this proposal of a new Department of Education, and I have not yet taken a position on it, is that I can see where that new bureaucracy is going to strongly oppose this approach, this concept, because then they would have less to do. There will not be any of these GS-15's, 16's or whatever else you have in the Civil Service to administer it. That is what bothers me about so many of these other programs. They are eaten up in the redtape of the bureaucracy.

What all of us here are trying to do is to find a means of giving help to those whom these programs are not assisting, and to give some aid to those we have forgotten in the past.

Senator MOYNIHAN. I think the President is going to have to pay very close attention. If he wants to create a department that will wind up being comprised of persons whose institutional interest is to destroy the private sector of American education, I say the hell with it, and you don't have to get yourself too far out on that, sir. I wanted to confirm your view about whether this initiative would diminish support for the earlier programs for which the main thrust has been equalizing opportunity.

We have said it over and again. "The Thing" will always deny it, but the fact is, the three of us here and the people who have joined with us have a record in this matter. We are not new to the subject. Senator Packwood and Senator Roth have supported these measures from the beginning. I drafted the message of the President of the United States which proposed the basic grants program. This was the first priority, but we met it, and now we are dealing with something-Chancellor Eggers comes along and says to us, there is now a clear inequity. The children of middle-income families do not get to Syracuse University. Well, Syracuse University was founded for such children.

Mr. EGGERS. The mayor of our city was a graduate of our university, and he feels great difficulty being able to send his children to our school, because he has two or three children in school at the same time.

Senator MOYNIHAN. You do not perhaps know that he is the victim. of that dread middle class affliction. The one thing we did learn from HEW, "The Thing" told us that is called sibling overlap.

Mr. EGGERS. I am sorry about that. [General laughter.]

Senator MOYNIHAN. It is one of the few afflictions known to the American people which HEW feels those involved brought upon themselves. [General laughter.]

Mr. EGGERS. Their burdens are nevertheless very real.

Senator MOYNIHAN. But Mayor Alexander, who is chairman of the U. S. Conference of Mayors, has difficulty sending his children to that great university to which he himself went.

Mr. EGGERS. He is also a trustee.

Senator MOYNIHAN. That is marvelous, marvelous. Thank you very much. It was a pleasure to have you here.

Mr. EGGERS. Thank you very much.

[The prepared statement of Mr. Eggers follows:]

STATEMENT OF MELVIN A. EGGERS, CHANCELLOR AND PRESIDENT, SYRACUSE UNIVERSITY, AND CHAIRMAN, LONG RANGE FINANCE COMMITTEE, NEW YORK STATE COMMISSION ON INDEPENDENT COLLEGES AND UNIVERSITIES

Mr. Chairman and Members of the Committee: As the Chancellor and President of Syracuse University, and as the representative of New York State's Commission on Independent Colleges and Universities, an organization of more than 100 independent institutions of higher learning, I am pleased to submit this testimony in support of the Moynihan-Packwood proposal for limited tax credit for tuition. That proposal deals with tax credit for tuition at all school levels; my testimony applies only to tuition at postsecondary institutions. My testimony also proposes a refinement of the Moynihan-Packwood proposal, but my support for the principle that tuition tax credit must be incorporated into our tax structure is unequivocal.

I am convinced that tuition tax credit is an idea whose time has come. It is the right public policy at the right time.

A HIGHER PRIORITY HAS NOW BEEN MET

We have succeeded as a nation in extending opportunity for post-secondary education to growing numbers of young people from the lower economic segments and ethnic minorities of our society. That was our highest priority, and we can be proud of what has been achieved.

This achievement has resulted from the use of a complex set of student assistance programs, including basic grants, supplementary grants, state incentive grants, direct and guaranteed loans, and work-study programs-all based on need, for which the cut-off point is at a relatively low income level. These programs, designed to increase access are overburdened even for the purpose for which they were designed. They have presented problems both for applicants and administrators. They have yielded a "crazy quilt" of application and eligibility procedures which is bewildering to potential applicants, have defied the ability of our bureaucracies to administer them, and have resulted in a labyrinth of disconnected, over-lapping and uncoordinated parts that must be brought into better order.

These programs can no doubt be improved but they will continue to be directed toward the goal of access for which they were designed. They are simply not suitable for the quite different purpose of easing the burden of the cost of higher education to middle income families. For that goal, there must be a new program, not simply an extension of a much-too-complicated set of programs designed for a different purpose.

THE NEED FOR A NEW PROGRAM

It is important to recognize that in achieving greatly increased access to higher education no small part has been played by middle income families. They pay for programs which enable others to attend college, even though they receive almost no relief from the burdens they experience in covering the cost of education for members of their own families. On our own campus, we find that students from lower income families are over-represented relative to their share of the population. Students from middle income families are clearly under-represented. It has been said, and with some good evidence, that to attend an independent university one must come from a very poor family or a very rich one.

I am sure that all of you have heard from middle class constituents about their difficulties in meeting the cost of higher education. Nearly one-half of the students entering independent colleges and universities must borrow to cover a portion or all of their college expenses. We have all heard about the societal ramifications of an "indentured" class ("Students: The New Debtor Class" by Michael Jensen, Winter Survey of Education, Section 13, New York Times, January 8, 1978). Clearly, loans do not offer a complete solution.

The legitimate college aspirations of some middle income families are being frustrated. There is evidence of decline in college attendance rates of the children from families in the middle income bracket. It is not surprising that, lacking access to aid that will diminish net tuition price, some students turn away from a college education. Meanwhile, their families are being asked to help provide relatively generous support to enable others to go to institutions which they cannot afford to attend. The Moynihan-Packwood program of tuition tax credit will help to correct this situation and strengthen the right of all students to decide

on a college education on the basis of academic, rather than economic considerations.

THE EXTENSION OF AN ESTABLISHED PRACTICE

The basic practice of modifying the tax structure as a means of financing a public good for middle income citizens is clearly well established. Tuition tax credit may be likened to other middle income tax incentives such as the deduction of interest payments on home mortgages and the deduction of extraordinary health costs. Tax breaks for health care and home mortgages are in recognition of their disproportionate claim against family resources. Higher education also has a high social value and it, too, makes a disproportionate claim against family resources. For many families the cost of educating two or three children exceeds the cost of a home. Moreover, educational costs are often concentrated into a short period of time.

Tax credit for business firm investment in physical capital also has wide support as a public policy. The tax rebate covers a fraction of the total cost of new capital, in order to provide the optimum stimulus per dollar of revenue loss. In encouraging new capital formation, the tax credit has the important advantage of not otherwise distorting economic decision making. The use of tuition tax credit in supporting education, i.e., human capital formation, is an appropriate and consistent element of the tax structure.

Tuition tax credit offers an equitable and simple method of extending education opportunities.

A REFINEMENT OF THE MOYNIHAN-PACKWOOD PROPOSAL

As currently proposed, the Moynihan-Packwood Program would offer a refundable tax credit against net tuition paid (i.e., after grants, scholarships, etc.) for any part-time or full-time student who attends an elementary, secondary, or post-secondary education institution. The amount of this tax credit would be 50 percent of such tuition payments up to a maximum of $500 per student.

The refinement I propose is that the tax credit eligibility cover 25 percent of tuition payments up to a maximum of $1,000, at least for college students. To show the significance of this refinement, suppose one family pays $1,000 tuition for a student to attend a public institution, that is, one where most of the cost is already being paid by taxpayers; and another family with similar economic circumstances pays $3,000 tuition for a student to attend an independent institution where the tuition is $3,000, that is, where relatively little of the cost is being paid by taxpayers. There is a $2,000 difference in tuition, and one family pays three times as much as the other.

According to the Moynihan-Packwood proposal both families would receive a $500 tax credit making the net tuition $500 for one family and $2,500 (five times as much) for another. I suggest that a more equitable schedule would be a tax credit of 25 percent of tuition for each family. For the family of the student at a public institution, the net tuition would be $750 and for the other family the net tuition would be $2,250. The second family would still be paying three times the net amount of tuition just as it would without the tax credit.

This proposal better serves the criterion of maximum stimulus with the least revenue loss. It does so by meeting a lower fraction of the parental expense at every college or university but also by recognizing that parents whose children attend independent institutions pay higher tuition because those institutions do not have the same benefit from state support.

Some who oppose the tuition tax credit proposal have suggested that college and universities might increase tuition in an amount equal to the tax credit. There is a built-in safeguard against this in that the tax credit is designed to cover only a fraction of each family's actual tuition costs and the program provides a cutoff ceiling. This is true for both the Moynihan-Packwood plan and for the refinement I have suggested. Most, if not all, if any increase in tuition would still have to be paid on the basis of cost increases.

CONCLUSION

The Moynihan-Packwood approach offers a direct mechanism to relieve the financial burden on the middle income family with dependents in college. The need for relief is clearly evident. The proposed method of providing relief is already public policy for similar burdens and for similar situations calling for

incentives. As families move out of income brackets where they are eligible for student grants, they should become eligible for tuition tax credits. There is an attractive logic to such a program. It would not expend the federal bureaucracy nor would it exacerbate the present problems of student aid program administration. It will, in fact, complement existing aid programs.

The refinement I have proposed retains the basic approach of the MoynihanPackwood proposal but, in my judgment, increases its equity.

Tuition tax credit would salvage, in Senator Moynihan's words, "the world's most varigated and pluralistic system of education in existence."

Senator PACKWOOD. We will next take both Dr. Wallin and Mr. Fuller, representing the Great Lakes Colleges Association, and then we will skip to Dr. Lubbers, who has to catch a plane, and if I keep him any longer he will not be able to catch his plane. If he does not get out soon, he will not perhaps get out at all.

Mr. FULLER. Thank you very much. We thought that it might be useful if a college president who has to deal regularly with the parents who pay tuitions at our colleges meet with you. We were able to arrange for Dr. Wallin to be here. He will present our statement. Senator PACKWOOD. We are delighted to have you.

STATEMENT OF DR. JON W. FULLER AND DR. FRANKLIN W. WALLIN, GREAT LAKES COLLEGES ASSOCIATION

Mr. WALLIN. Mr. Chairman, members of the committee, it is a real pleasure to be here to offer testimony on this tax credit. I am here representing the collective position of 12 private independent liberal arts colleges called the Great Lakes Colleges Association, and we favor an income contingent tuition tax credit.

We are, as you are, well aware that the college education constitutes a significant and sometimes unusual burden for many American families and students. We are also aware, as you are, that the combination of Federal and State institutional scholarships and loans has kept college education within the reach of many talented young people from lower income families. But we are also aware, and particularly aware, I think, that the existing student aid programs do not significantly help middle income families who find college tuition bills a serious and often unusual strain on their family budgets, sibling overlap included.

We believe there is a need for further assistance with these educational costs. It is also clear that many in the higher educational community might prefer other means than tax credits for this assistance, but I am aware and I think many of my colleagues are aware that the political realities are that the Senate and Congress see in the tax credit method an effective way, a desirable way of realizing the benefits we desire for the middle-income families. Tax creditors are obvious attractive because of their administrative simplicity. None of us, I think, is anxious to add employees to HEW. We feel, though, that the tax credits are important as a matter of public philosophy, because they directly recognize the family's contribution to their own children's education. The principle is an important principle to preserve, relating the level of effort in the family to supporting their own children's education. It follows a general principle which is observed in other legislation supporting students who are going to institutions of higher education of relating aid to need. We believe that tax credit for tuition.