a family were to send one or more of its children to a private institution, the cost, largely due to tuition, would be perhaps twice as much. As your legislation is presently drafted, it will be of great help to the parents of students attending California State University, Long Beach, and similarly priced institutions. But for an instiution, such as Stanford University where the undergraduate tuition alone is now $5,130 an academic year, such a limited tax credit would be of marginal benefit to the parents involved. In the drafting of tax credit legislation, I believe there should be a maintenance of effort or cost-of-living increase limitation which would prevent either public or private institutions-primarily the State Legislatures and Board of Trustees which govern them-from using the federal tax credit to escalate tuition and fees and then ultimately shift the burden of that increase to the federal government. If such actions should occur, there would be a tragic setback for the access to education now provided by many no- or low-tuition institutions such as Long Beach. All the federal aid in the form of grants, loans, and tax credits does not overcome the psychological barriers to access which highly priced tuition and fees pose to prospective students and their parents. Perhaps only making the tax credit available to parents if their children are attending public or private institutions where tuition and fee increases do not exceed a "cost of living" guideline would build in some consumer pressure against the unreasonable escalation of tuition. I would hope that great care would be given to the definition of a "full-time student." Increasingly, more and more students are married and work half- or full-time in order to secure a college education. To pay the bills, they stretch out their attendance and take one, two, or three courses rather that four or five during a semester. By and large, because of cost, the traditional "residential and full-time" student will become largely a memory. Consequently, there is a need to explore the ramifications of "full-time" before locking in a particular definition. For more than a decade I have been thoroughly convinced that perhaps the most useful policy to spread out the burden posed by the high costs of a college and university education would be a deferred loan system. This would permit the taxpayer to spread the costs, whether $10,000 or $30,000, over a ten to fifteen year period through the use of the federal income tax system as a collection device. Such an approach would recognize that the nation has a responsibilty to utilize its tax system and the incentives it can provide to invest in its people as well as in its machines. As with the impact of the G.I. Bill, such a human investment would be more than repaid by the enhanced productivity and personal growth of the citizenry. I do hope that you and your colleagues will explore this approach in the months ahead. Again, my congratulations on undertaking this effort. With kindest regards, STEPHEN HORN. TAX RELIEF FOR COLLEGE EXPENSES C. Lowell Harriss, Professor of Economics, Columbia University; Economic Consultant, Tax Foundation, Inc.; Associate Lincoln Institute of Land Policy. Views expressed are my own and not necessarily those of any organization with which I am associated. Statement for Subcommittee on Taxation and Debt Management Generally, Committee on Finance, United States Senate, January 19, 1978. Convincing arguments support the proposals for tax credits for higher education, including vocational schools. The case for tax credits for tuition in nongovernmental elementary and secondary schools also seems to me highly impressive, but my comments will focus on higher education. My personal interest-bias-should be noted. My own children have completed college and graduate education (except for essentially one year), and I could not expect direct personal benefit in this respect. As a faculty member of a university I do have personal interest in the future of the institution. Moreover, I see many students and identify emotionally with them; the relief which would benefit them-including, among other things, improving the conditions under which they take advantage of the opportunity to study-unquestionably appeals to me. Recognizing, therefore, some possible lack of objectivity, a lack for which I make no apology, I hope that my conclusions rest upon a solid basis of reasoned concern for a large portion of the public, today and in the years ahead. BUNCHING OF EXPENSES: NEED FOR RECOGNITION OF "LUMPINESS" OF EXPENDITURE AS BASIS FOR INCOME TAX ADJUSTMENT Averaging has a recognized place in an income tax imposed at graduated rates. Expenditures as well as receipts can vary significantly from year to yearthe expenditures which should be recognized in measuring "ability to pay" for government. Equity and fairness in taxation can be achieved only if allowance is made for differences in economic position. The personal exemption and credit for dependents make some adjustment. But the economic positions of families differ for compelling reasons which grow out of variations in conditions. Expenses of higher education are “lumpy." They appear in rather few of the total years of a normal family history. But these expenses are for large numbers of families necessary-essential-by a reasonable definition of those concepts. The role of higher education in upward mobility is familiar. Its place in preparing for personal development needs no comment here. What does deserve recognition is this reality: In the years in which children are in college the family has exceptional expenses of a compelling nature. During these years the family's ability to pay taxes will be materially less in a meaningful sense than it will be in other years (per dollar of receipts). Just as unevenness in the flow of receipts justifies tax relief in the form of averaging when tax rates are as steeply graduated as they are today-the unevenness of spending (which cannot possibly be considered to be adequately recognized by a dependent credit of $750 or some such amount) calls for adjustment in taxation. In this sense the proposal advances a defensible concept of equity and fairness in taxation. THE TAX OF INFLATION Should not families wtih children save in advance to pay for higher education? We head-but not correctly, according to the figures-that a big fraction of beneficiaries would be in "higher" income families. Those that are more prosperous might properly be expected to have saved in advance to pay for a "lumpy" and large expenditure known to lie ahead, the years of college. Some have tried to do so. What has inflation done to the worth of past saving? Half or one-third or one-fourth of the real worth has been confiscated by inflation. This unhappy story requires no underscoring here. Whether or not "government" has been the confiscator can be debated. Family situations differ enormously as regards the effects of inflation. One generalization, however, does seem to me directly relevant to proposals for relief for higher education. The prudent, those who took forethought and tried to prepare by having, these have suffered real deprivation because of inflation. TAXATION AS A CAUSE OF NEED The proposal would offer a tax (partial) "solution" to a problem growing in part out of high taxes. Critics of the tax credit can rightly say that it will not "solve" all the problems and that because the problems are varied in nature and amount the tax credit would not be ideal. Each of us can always find ways to use the other fellow's funds better than we think he will use them. Advocates of redistribution feel convinced that they can allocate the use of earnings (from effort and thrift) better than can the owner. Opponents of the tax credit cite "better ways" to use the tax relief proposed. In effect, I submit, some arguments imply that if Congress decided that some marginal tax rate is to go into the law, Congress should not alter the rate to reduce the burden. What the bills before you would do would be to use a tax device—a tax credit-to help deal with a problem growing out of high tax rates. The taxes reduced disposable income. As a result the ability to finance education suffers. Families which do not pay the tax do not suffer from a tax-created deprivation. Governmental policy to deal with one problem will not deal with all others. But there are families for which the income tax in years when higher education must be paid for imposes exceptionally disabling effects. The tax credit would mitigate the effects which grow out of taxes that are unquestionably major sources of need. CONSUMER CHOICE The tax credit would provide more in consumer choice than would some other proposed forms of aid. As an employee of a university a professor will be expected to look with favor upon governmental funds to support the institutions as such. This focus certainly has attractions in a world of inflation. Be that as it may however, the aid-or may I say, not "aid but reduction of tax-created obstacle"?-which rests at the student level offers him or her freedom of choice. Over the years the net benefits per dollar of tax relief can be expected to be greater when students have some "consumer sovereignity." The whole question of student capacity to select colleges wisely involves unknowns. On balance, however, I believe that the processes of choice will operate more effectively in a more constructive sense if the "buyers"-students-have the freedom and power which would result from the tax credit. May I depart here from the earlier self-limitation and note that for elementary and secondary education the scope for selection ought to work to improve the quality of education. The beneficiaries would be, not only those electing to go to non-governmental schools but perhaps many in those schools as a result of vigor and strength in the private sector. OTHER BENEFITS Space limits preclude discussion of other aspects. It should be clear that some of the arguments are complex and that objections raised, notably last year by the Treasury, deserve respectful attention. Do they not, however, often boil down to this conclusion, "Let us (government officials) direct the use of your earnings"? In response, does not one affirm a fundamental of outstanding importance in asserting, “Equity and efficiency and constructive incentive will be advanced by tax relief which gives taxpayers power to dispose of more of their own earnings as used for higher education." Mr. MICHAEL STERN, BEMIS COMPANY, INC., Minneapolis, Minn., January 20, 1978. Staff Director, Senate Committee on Finance, DEAR MR. STERN: I understand the Senate Committee on Finance is soliciting views in regards to the need for tuition aid exemption from employee tax obligation. Twenty years experience of assisting the vocationally disadvantaged select, prepare for, enter into employment, and strive for optimal vocational development, leads me to believe lack of such a provision would seriously curtail employee education assistance and affirmative action programs. In light of public and private sector interest to promote additional employment opportunities for minority group members, females, veterans and the handicapped, I urge the Committee to recommend a tuition aid exemption. Sincerely, PAUL R. BARRINGTON, Corporate Manager, EEO and Training. NATIONAL UNIVERSITY EXTENSION ASSOCIATION, Senator HARRY F. BYRD, Jr., Chairman, Subcommittee on Taxation and Debt Management Generally, Senate Committee on Finance, Dirksen Senate Office Building, Washington, D.C. DEAR SENATOR BYRD: The National University Extension Association respectfully submits the following information for the record of your hearing January 18, 19, 20 on proposed legislation that would provide tax credits for educational expenses. The National University Extension Association is an organization of 265 colleges and universities that conduct extension and continuing education programs. These are programs that serve people who are part-time students at these institutions. Traditionally, college students have been people 18 to 22 years of age. The situation has changed drastically in recent years. Today over half the people studying at our colleges and universities are older than this traditional age group and are part-time students. These are adults, mostly working people, trying to acquire knowledge to get ahead in the world. They are beyond the stage in life where they are supported by their parents. Many are studying to obtain college degrees. Others seek certification for employment, or just seek knowledge they need. The trend continues. Each year brings an increasing number of adult parttime students to college and university programs. Colleges and universities are responding to these needs by providing instruction at times and places accessible for these adult part-time students. Federal legislation and programs are just beginning to recognize this new majority in higher education. We strongly urge the Congress to consider the financial problems and needs of these adult part-time students as you consider the tax credits as a means of helping people pay costs of education. Let me illustrate the problems and needs. Take the case of a young man from a low income family who after graduation from high school was not motivated for higher education but had other more pressing goals. He got married, took a job pumping gas at his neighborhood gas station. Now at age 25 he has two children, is still pumping gas, scarcely able to make ends met and sees a drab future ahead. He decides that his best way out is to study at night at his local community college or university to prepare for a better job, but he is broke every payday, now. He sees his 18 year old brother leaving high school, going on to college and receiving from the government a Basic Educational Opportunity Grant to pay for part of his education. He rightfully wonders "is this just and equitable treatment." Can anyone say the need of one brother is any more a public concern than the other? Can anyone say the needs of one has a higher priority for spending federal money than the other? If now the Congress passes new legislation giving this boy's father a tax break for the educational expenses he pays for the younger brother but not a tax break for the older brother who would take one course per quarter at night, you will only compound the injustice. There are millions of people in situations like this older brother. This is not an unrealistic example. I cite below some real world examples. The University of Minnesota has a very small fund from which it helps needy part-time adult students. Here is a brief description of a number of people who applied for help to take one course per quarter but whom the university could not help because of a lack of funds: P.M. is 33, divorced, female, has 4 children (ages 10, 11, 13, 15). She is employed as a secretary. Gross income=$800/mo. ($9,600/yr.); net income= $765/mo. ($9,180/yr.). Her income includes her salary, plus child support. Medical/dental=$20/mo. W.A. is 25, single male, employed as a school bus driver. Gross income= $500/mo. ($6,000/yr.); net income=$325/mo. ($3,900/yr.). Student loan= $30/mo., personal loans=$66/mo. D.L. is 24. married. female, has 1 child (age 5). She is employed as a bookkeeper; her husband is employed as a school bus driver. Gross income $900/ mo. ($10,800/yr.); net income $70/mo. ($8,400/yr.). Medical/dental=$15/ mo., daycare $140/mo. P.C. is 36, female, divorced, has 2 children (age 5 and 18). She is employed as a senior clerk. Gross income $876/mo. ($10,512/yr.); net income $600/ mo. ($7,200/yr.). Medical/dental=$30/mo., daycare $50/mo. J.G. is 32, married, female, has 2 children (ages 11 and 15). She is employed as a sales clerk: her husband is self-employed as an architectural draftsman. Gross income $1,050/mo. ($12,600/yr.); net income $800/mo. ($9,600/yr.). Dental $25/mo., health insurance=$68/mo., medical-$20/mo. L.H. is 30, separated, female, has 2 children (ages 7 and 10). She is employed. Her income is derived from employment and child support. Gross income= $950/mo. ($11.400/yr.) net income=$795/mo. ($9,540/yr.) Medical=$10-15/mo., health insurance=$10/mo., daycare=$100/mo. W.H. is 26, married, male, has 2 children (ages 5 months and 2 years). He is employed as an electronic technician; his wife is a homemaker. Gross income= $900/mo. ($10,800/yr.); net income=$696/mo. ($8,352/yr.). Medical=$25/mo., health insurance=$8/mo. T.N. is 32, divorced, female, has 2 children (ages 9 and 12). She is employed as a clerk and as a caretaker in her apartment building. Gross income=$707/mo. ($8,484/yr.); net income=$650/mo. $7,800/yr.). Her income includes her salary, plus child support. Medical $20/mo., dental=$15/mo., health insurance= $25/mo., legal fees=$50/mo. L.S. is 39, married, female, has 3 children (ages 8, 15, 17). She is a homemaker; her husband is employed as a research agronomist. Gross income= $970/mo. ($11,640/yr.); net income=$729/mo. ($8,748/yr.). Medical=$70/mo. C.W. is 22, single, female. She is employed as a fashion consultant. Gross income=$500/mo. ($6,000/yr.); net income=$400/mo. ($4,800/yr.). Medical/ dental $20-30/mo. These are real people. They will not speak at a congressional hearing because they are working and couldn't pay the cost anyway. They are not organized and so have no one to speak for them. The National University Extension Association speaks for university personnel that are trying to serve their needs. We urge you, if you pass a bill that provides tax credits for educational expenses, don't limit the benefits to parents of "traditional" students. Help these hardworking, dedicated, deserving and needy people too. They are just as needy. just as deserving, and their education is as much in the public interest as the full-time "traditional students" and their parents. If you limit the benefits to full-time students, to those who are full-time students part of the year, or to better-than-half-time students, these hardworking part-time students will be dished out another injustice. Sincerely, LLOYD H. DAVIS, STATEMENT OF BETTY LEA BROUT, PRESIDENT, NATIONAL WOMEN'S CONFERENCE OF THE AMERICAN ETHICAL UNION My name is Betty Lea Brout. I am President of the National Women's Conference of the American Ethical Union. The American Ethical Union is a federation of national Ethical-Humanist Societies and Fellowships across the country and includes hundreds of members-at-large who share with us our religious ethical-humanist philosophy. The National Women's Conference of the American Ethical Union is, in turn, a federation of women's groups within our local Ethical-Humanist Societies and of members-at-large who are at one with us in our commitment to religious humanism as a way of life. I intend to limit my statement in opposition to this single point: the controversy between those who believe that the universal availability of sound public education in the United States is one of our most precious "goods" and those who in their support of the concept of public support of nonpublic education, would weaken our public school system by causing the majority of us to agree to divert public funds for the educational support of the few. We believe that the present public school system in this country is the focal point of our unceasing efforts to develop and maintain a free and strong society. Any proposal to give public funds to sectarian parochial and private schools diverts attention and strength from that focus. Indeed, such an attempt raises issues that extend even beyond the principle of separation of church and state. It forces us to confront the violation of other freedoms, other of our historic American values, for parochial and private schools, in fact, foster and encourage segregation: segregation not only by religion, but by nationality, economic level and class as well. It is when children from the rich cultural segments of our society come together in the public school classroom that they may learn and benefit from every other segment. To limit that exposure, and to encourage its dissipation by using public monies to support a segregated system of private education is to weaken the fabric of a democratic America. The public schools in this country offer our children the hope of a better life, not only in terms of personal growth and development, but also in terms of a keener understanding of the principles that guide the mainstream of life in these United States. Public schools are, in fact, a microcosm of American life. In their classrooms, where children are integrated by color, creed and class, youngsters learn early in life a most valuable lesson. They learn about cooperation with and acceptance of others who are different, and it is that lesson that is essential to a successful and productive adulthood. This is a time to give public schools more, not less, in the way of public monies. Life in this country is in a constant state of change, flux, movement, all of which mandate reforms in both urban and rural schools, reforms that require person |