The credit may be targeted narrowly on families with $10,000 to $25,000 incomes who want a full-time accredited college degree program for their children. Or the credit may be granted to all Americans (like the benefits of medicare) for all postsecondary programs-full-time or part-time, for degree credit or otherwise.

The provisions of any tax credit legislation may be just as sharply tuned as the provisions of other authorizing legislation. Once in place, tax credits are not subject to the fluctuations of the appropriation process. This has an important advantage for middle-income families could make definite plans knowing exactly how much tax credit would be available each year. This is often not the case with need-based student financial aid to date administered by federal, regional, state or institutional procedures.

CONCLUSION

It appears that upper-lower and middle-income families are denied equal access if they wish to send their children to college.

Expanding need-based aid to middle-income citizens raises may difficult problems. Tuition tax credits for middle-income citizens, on the other hand, has historical precedents in similar Congressional actions to relieve the taxpayer and to stimulate the public good. Legislation can be targeted to achieve the objective of assistance to middle-income families assuming the costs of post-secondary education for their children. In addition, tax credits are more in tune with the middle-class values of providing for equal opportunity for all.

It would appear that S. 311 fulfills many of these objectives and would be of great assistance to millions of middle-income citizens across the country struggling to give an opportunity to their children for postsecondary education.

ATTACHMENT A.-AACJC COMMISSION ON GOVERNMENTAL AFFAIRS

TAX CREDITS FOR POSTSECONDARY EDUCATION TUITION

The AACJC Commission on Governmental Affairs is deeply concerned about the present financial plight of our Nation's middle-income families. These families dedicated to the benefits of higher education for their children-today find themselves on a seemingly endless economic treadmill. Inasmuch as their dependents are generally ineligible for significant amounts of federal or state student financial support, they watch their tax dollars provide needed student assistance to the more economically disadvantaged, while they themselves are unable to find the necessary resources to meet their own children's rising college costs. The Commission believes that an equitable system of federal income tax credits for tuition for postsecondary education can provide meaningful relief for these families. Moreover, it is the view of the Commission that such a program is a necessary complement to our present programs of financial support to economically disadvantaged students; will increase educational opportunities for the people of our Nation; will help maintain family relationships; and will provide a stable system of educational funding for postsecondary students.

Therefore, the AACJC Commission on Governmental Affairs supports prompt Congressional action to establish an equitable system of tuition tax credits for postsecondary education for upper-lower and middle income families.

ATTACHMENT B.-THE BUDGET FOR FISCAL YEAR 1978 (SPECIAL ANALYSIS F) TABLE F-1.-TAX EXPENDITURES ESTIMATES BY FUNCTION

Senator PACKWOOD. Next is Thomas J. Reese, legislative director of Taxation with Representation.

Senator ROTH. Mr. Chairman, I do have a statement here by Dr. Mayer, who was supposed to be here, but because of the weather and transportation problem is not here. I would request that his statement be included.

[The prepared statement of Mr. Mayer follows:]

STATEMENT OF DR. ROBERT W. MAYER, ASSISTANT VICE PRESIDENT FOR STUDENT

SERVICES

In the last Congress, the Senate approved an amendment to the Tax Reform Bill to provide tax credits for higher education expenses. The legislation would have allowed tax credits of $100 in 1977, with an annual increase of $50 per year to a maximum of $250 in 1980 for each student enrolled full-time at colleges and post-secondary vocational schools. Those eligible would have included the individual taxpayer, the taxpayer's spouse, and dependents.

In the final revisions to the Tax Reform Bill, the House Senate Conference Committee deleted this amendment from the Bill, but it is understood that there was an agreement to introduce the same or a similar proposal early in the next session of Congress. Proponents of this legislation believe that it has a good chance for passage, so it would seem proper that the higher education community determine its position relative to tax credits for higher educational expenses. In the early 1960's the National Association of State Universities and Land Grant Colleges opposed tax credits as a means for subsidation of higher education expenses. The primary argument for that position was that tax credits would benefit middle and upper-income families, but would have little impact on low-income families, the segment of the population which at that time had limited access to higher education because of inability to meet college expenses. Two circumstances substantially weakened that position. First, massive financial aid programs supported by state and federal governments have effectively eliminated the barriers which prevented low-income students from access to higher education. Second, colleges and universities has found it necessary to make significant increases in tuition and fees, not only because of inflation in the general economy, but also because, in many cases, subsidation from government and private gifts and benefactions support a smaller proportion of operating expenses, thus shifting a higher proportion of these costs to the student. The higher cost of tuition and fees has had greatest impact on the middle-income family which is not eligible for direct financial assistance provided by financial aid programs. There are a number of arguments to support a change in the NASULGC position, assuming that future proposals are similar to one that was presented in the last session of Congress.

1. The plight of the middle-income family in meeting higher education costs has been of increasing concern to the educational community. Whether, as proponents of tax credit legislation have claimed, the decrease in the proportion of college-age students enrolled in higher education is primarily a function of the increasing inability of middle-income families to meet educational costs, it certainly has some impact and probably is a major factor in the selection of colleges and universities, reflected in the increasing number of students enrolled in lowercost, public institutions. A study at the University of Delaware, for example, indicated that the proportion of disposable family income required of middleincome families to meet tuition and fees has increased sharply. So long as state and federal financial aid programs which provide access to higher education for low-income students are continued (and this must be a contingency in the consideration of tax credits), then the proposed tax credit for educational expenses is a viable means to insure middle-income students the same access and options for higher education that are available to more affluent students and students from lower-income families who receive financial aid subsidation.

2. The utilization of tax credits provides a more direct and therefore, less costly method for providing assistance to middle-income students than would an extension and enlargement of present financial aid programs. Colleges and universities have noted the significant administrative costs associated with present financial aid programs. Were Congress simply to raise the eligibility requirements for participation in existing programs and to increase funding so as to include middle-income students, obviously there would be proportionate increases

in the overhead costs for administration and management of these programs. Tax credits would impose no such overhead costs, and the full dollar value of the credits would apply toward educational expenses.

3. Tax credits offer a means to assist students and, indirectly, institutions of higher education without the imposition of additional controls and regulations. Congress is obligated to insure a proper expenditure of public funds. It is a necessary condition that there be rules, regulations, and controls imposed upon the recipients of such funds. At the same time, American colleges and universities guard jealously their autonomy and prerogatives for self-control and governance. Support in the form of tax credits rather than governmental appropriations is less likely to require controls which are seen by colleges and universities as interference in internal matters.

4. Public policy as reflected in congressional action which is supportive of higher education has a positive effect on public opinion. For example, the National Defense Education Act was successful in focusing the attention of the American people on the benefits of higher education and undoubtedly contributed to the high percentage of college-age population that enrolled in colleges and universities in the 1960's. In recent years the American public seems to have lost confidence in colleges and universities. Moreover, it has appeared at times as though public policy was directed against higher education. Tax credits to assist middle-income families in meeting college expenses would, therefore, serve as a positive way for Congress to reaffirm its support for higher education.

5. Governments at all levels are faced with serious budget problems, and higher education finds it increasingly difficult to compete with other public services for funding from governmental sources. Many observers have noted the need for the federal government to underwrite a larger share of higher education costs because of the inability of state governments to do so. Realistically, the probability of increased support for higher education from either state or federal governments who direct appropriation is, at best, uncertain. If educational costs continue to increase, even at the rate of general inflation, then the only alternative may be for colleges and universities to shift an even higher proportion of this cost to the student. The support which has been generated in Congress for the tax credit proposal seems to indicate that this may be more acceptable than would direct appropriations as a means for increased support to higher education. It has been estimated that the cost of the tax credit proposal through loss of revenue when fully implemented would range between 1.1 and 2 billion dollars annually. When placed in the context of other federal appropriations, such as those for foreign aid, defense, and other domestic programs, the cost is comparatively small. It also is less than the 3.2 billion dollar cost of the Basic Opportunity Grant Program which impacts on a much smaller proportion of the college-age population.

Opponents of the tax credit proposal have raised arguments that seem less substantial that those favoring the enactment of this legislation. For example, it has been suggested that colleges and universities would be encouraged to raise tuition, thereby offsetting whatever gains might be achieved for the middleincome family in meeting college costs. As the college-age population decreases, competition for students may have a more important effect on tuition pricing policies than would a perceived windfall from tax credits. Opponents also have suggested that Congress, faced with the loss of revenue from tax credits, may reduce appropriations for higher education or might eliminate existing tax credits for charitable contributions to colleges and universities. Aside from the danger of self-fulfilling prophecies, nothing in the proposed legislation seems to suggest an intent to substitute tax credits for existing appropriations or to make up the revenue loss by elimination of existing credits for such contributions. In fact, those who have supported the tax credit proposal have presented it as a means for extending financial assistance from existing programs which aid lowincome students to those from middle-income families. Finally, there are those who argue that tax credits would benefit high-income families who need no assistance, but it is obvious that a $250 credit would have a greater impact on a middle-income family than it would for a high-income family.

It would appear, then, that the higher education community would benefit from tax credits for educational expenses and that support for this legislation would be in the interests, not only of students, but of colleges and universities themselves.

(Prepared as position paper for the 1977 meeting of the National Association of State Universities and Land-Grant Colleges.)

STATEMENT OF THOMAS J. REESE, LEGISLATIVE DIRECTOR, TAXATION WITH REPRESENTATION

Mr. REESE. Good morning and thank you, Mr. Chairman.

Mr. Chairman and members of the committee, I am Thomas Reese, legislative director of Taxation With Representation, a public interest taxpayers' lobby, and I am here to testify in opposition to the college tuition tax credit proposals.

The proposals of tax allowance for college education expenses seem to be motivated by a desire to alleviate the financial burden of middleincome families who must bear the high cost of putting their children through college without either the resources of the rich or the aid programs available to the poor. In fact, however, the credit is nothing but a placebo. It will not help the middle class for which it is designed. Nor will it help private higher education. This is so for a number of reasons.

Tuition costs have not risen dramatically. A presupposition in all of the arguments in favor of the college tuition tax credit is that educational expenses have risen dramatically. This is simply not true when compared with the relative increase in median-family income. Between 1967 and 1976, college charges for tuition, fees, room and board, rose about 75 percent, but at the same time, median income has increased almost 89 percent.

As a result, the relative financial burden for putting a student through college is actually less than it was 10 years ago. This does not mean that some families might not need help, but it does show that a general tax subsidy to everyone is no more necessary today than it was 10 years ago.

AID TO MIDDLE-INCOME FAMILIES

Another fallacy supporting the credit is the argument that middleincome families are not helped by the current programs. Again, this is not true. In fiscal 1977, the Federal Government provided $8.5 billion in student aid in the form of direct outlays and tax expenditures. Students from families with incomes between $10,000 and $20,000, who account for 33 percent of all students, receive 36 percent of this total, although they received a smaller share, 21 percent, of the $2.3 billion provided under programs based on need. Middle-income families are, therefore, already getting their fair share of Federal education aid.

Credit helps the wealthy. From the statements of the proponents of the tax credit for college expenses, one would think that the credit will only help middle-income families, but in fact 54 percent of the benefits of a $250 nonrefundable credit will go to taxpayers with incomes in excess of $20,000, who make up the richest third of the population.

Middle-income families, those with incomes between $10.000 and $20,000, receive only 34 percent of the benefits from the credit. If the college tuition tax credit is aimed at middle-income families, it misses its target.

Senator PACKWOOD. What is your source for those figures?
Mr. REESE. The Congressional Budget Office.

Senator PACKWOOD. That is for a $250 nonrefundable credit?

Mr. REESE. Yes.

Senator PACKWOOD. The bill we are sponsoring is a $500 refundable. credit. What are the percentages on that?

Mr. REESE. I have no computer resources to do those kinds of studies. I presume the Congressional Budget Office could do that kind of thing for you.

Senator PACKWOOD. Do you have access to the figures of the Bureau of Census.

Mr. REESE. Yes, but you have got to deal with those. I don't have the statistes.

Senator PACKWOOD. You picked the worst case. The Congressional Budget Office doesn't like our bill, and they took a $250 nonrefundable tax credit and tried to show it would not benefit the middle-income taxpayer, which is not even what we are talking about. Go ahead.

Mr. REESE. Well, sir, I think that a $250 nonrefundable credit is more likely to pass this Congress than any other bill.

Senator PACKWOOD. Your figure is accurate, but do not use it today on the bill that Senator Moynihan and I are the principal sponsors of, because they are not the same thing.

Mr. REESE. I have not mentioned your bill.
Senator PACKWOOD. Go right ahead.

Mr. REESE. Some supporters of the college tuition tax credit favor any tax credit or deduction which will lower taxes for the middle class because they feel that those taxes are too high. This approach is simplistic. The tax system will raise as much money as Congress determines is necessary, no matter how many credits, deductions, and exclusions are available.

What these gimmicks mean is that tax rates must be higher than necessary. If Congress adopts a college tuition tax credit costing approximately $2 billion in revenue each year, that will be $2 billion that will be unavailable for general tax cuts for all taxpayers. Thus, this credit means higher taxes for the elderly, for people who have already put their children through college, for childless couples, for single persons, for people in vocational schools, for everyone who does not qualify for the credit.

One of the major uncertainties of the credit is its effect on tuition costs. Some people argue that the credit will allow colleges to raise their tuitions at a faster rate than they would have otherwise. To the extent that tuition costs are increased, the credit's benefits for taxpayers are reduced as the colleges capture some or all of the benefits through higher charges. If this happens, the tax credit will be an aid to colleges and not to taxpayers.

On the other hand, if one argues that the colleges will not be able to raise their tuitions, then one must also recognize that they will receive no benefits from the credit. Both the colleges and the students cannot enjoy the same benefits. To the extent that one gets the benefits, the other does not.

Many people believe that the college tiution credit is especially helpful to private institutions. This is not the case. In fact, a flat credit will hurt private institutions. Although the credit will reduce the absolute cost of attending a private or public institution by an equal amount, the relative price of attending a private institution will be increased.