Diversity in primary and secondary education is already being achieved in the public schools in many locations. The public at large should not be taxed to support private preference.

Rather than tax credits, we believe the solution lies in reducing taxes by reducing governmental expenditures as a means of slowing down inflation. In this way not only the middle income individual but all taxpayers will have lower taxes and thus a better opportunity to meet the costs of education, whether it be public or private.

ELIZABETH M. ZAHORA, President.

ROCHESTER, N.Y., January 11, 1978.

Hon. RUSSELL B. LONG,

Chairman, Senate Finance Committee,
U.S. Senate,

Washington, D.C.

DEAR SENATOR LONG: We oppose the Packwood-Moynihan Bill (S-2142) providing tax credits for tuition, and respectfully request that you include our enclosed written testimony in the record of public hearings to be held January 18-20 on that bill.

Thank you.

Yours truly,

Mr. EVERETT H. SPRAGUE.
Mrs. Lois R. SPRAUE.

Testimony in Opposition to the Packwood-Moynihan Bill (S. 2142), and its companion bill, H.R. 9332: Submitted, to be included in the record of the public hearings held on the bill, by Mrs. Lois R. Sprague and Wm. Everett H. Sprague, Rochester, N.Y., January 11, 1978.

The Packwood-Moynihan Bill (S-2142), and H.R. 9332, which provide tax credits for tuitions paid for college, private high and elementary schools are a travesty of human justice!

Under the pretext of helping the "suffering" parents who pay tuitions to privileged private elementary and high schools, including religious schools, and/ or tuitions at expensive colleges and universities, this bill would actually shift more of the tax burden onto the poor and lower middle income groups who send their children to public schools, and to low-cost state universities-if at all. This bill taxes the poor to support the indulgences of the rich.

Moreover, the United States Supreme Court has already found unconstitutional the tax credit for tuition at religious schools. Including colleges in the plan makes the aid to religion no less an issue! Tax credits for religious school education increases taxes for other citizens who neither belong to, nor care to support the churches sponsoring that education.

S. 2142 and H.R. 9332 violate church/state separation and immorally tax the poorer people to indulge the expensive habits of the more affluent !

STATEMENT OF DR. PAUL DAVIDSON, PROFESSOR OF ECONOMICS, CHAIRMAN, New BRUNSWICK DEPARTMENT OF ECONOMICS AND ALLIED SCIENCES AND DIRECTOR OF THE BUREAU OF ECONOMIC RESEARCH AT RUTGERS-THE STATE UNIVERSITY OF NEW JERSEY

My name is Paul Davidson. I live at 18 Turner Court, Princeton, New Jersey. I received a Bachelor of Science degree from Brooklyn College in 1950, a Master of Business Administration degree from City College of New York in 1955 and a Ph.D. in Economics from the University of Pennsylvania in 1959. I was a member of the Economics Department of the Wharton School of Commerce and Finance of the University of Pennsylvania and taught there during the periods of 19551958 and 1961-1966. From 1958 to 1960 I was an Assistant Professor of Economics at Rutgers University. In 1960-61, I was Assistant Director of Economics Division of the Continental Oil Company. In 1964-65, I was Visiting Lecturer and Fullbright Scholar at the University of Bristol in England. In 1970-71, I was a Senior Visitor at the Faculty of Economics and Politics of the University of Cambridge (England). I have been a Professor of Economics at Rutgers since July 1966.

I am the author of a book entitled Theories of Aggregate Income Distribution (Rutgers University Press, 1960) and one entitled Money and the Real World (Macmillan, 1972). I have coauthored books entitled Aggregate Supply and De

mand Analysis (Harper and Row, 1964), Milton Friedman's Monetary Framework (University of Chicago Press, 1975), and a monograph entitled Demand and Supply of Outdoor Recreation (Bureau of Outdoor Recreation, 1969). I am the author of numerous articles on various economic subjects which have been published in professional journals such as The American Economic Review, The Economic Journal, Oxford Economic Papers, Canadian Journal of Economics and Political Science, Public Finance, Econometrica, Land Economics, The Southern Economic Journal, The Natural Resources Journal, Review of Economics and Statistics, The Journal of Political Economy, Economic Inquiry, and the Brookings Papers on Economic Activity. I am also the editor of the Journal of Post Keynesian Economics.

I am testifying today in support of an Educational Tax Credit to be made a permanent part of the U.S. tax system. I believe there are many good reasons to support such a tax credit, but in the brief time allocated me before this committee, I wish to emphasize just two reasons-namely, the need for even more technically trained individuals to solve our resource limitation problems and the equity effect of providing substantial tax relief to the industrious middle income wage and salary earners.

Many economists and policy makers at all levels of government believe that beginning in the 1970's, our economy entered an era where resource limitations and scarcities, rather than a lack of effective demand, are major obstacles to growth and its concomitant rapidly rising standards of living for our citizens. If this is true and if we do nothing to improve the situation, we are condemning future generations to a dreary life in a stagnant economy.

Resource limitations, however, are constraints to growth and prosperity only when technological innovations and the growth of knowledge are not forthcoming. It is important to remember the historical record that the Malthusian concept of population outrunning resources and the "discovery" of the law of diminishing returns by Ricardo in the second decade of the 19th century occurred just at the inception of the Industrial Revolution with tremendous technological advances. Since Ricardo's and Malthus's time, those economies which have invested the largest proportions of their resources in educating their population, have seen their wealth grow at phenomenal rates, while the growth of those economies that did not invest much in education have been held in check by their "limited" resource base. In most of the latter countries, most of the population have remained in poverty for centuries.

Thus, if our society's future prosperity is being threatened by resource limitations, the solution is to invest in the "knowledge" industry, for the solutions to our problems require a more highly trained, technologically advanced labor force than ever. To the extent that a Tuition Tax Credit encourages and permits our population to finance its further education, it should be supported.

I need not remind this Committee that the Congress has recognized the importance of an investment tax credit for stimulating the accumulation of physical capital. The tuition tax credit would similarly affect the accumulation of human capital.

In my view, many of the important future benefits of the accumulation of knowledge are social rather than private in nature; thus private market incentives, in terms of higher future earnings, may not be sufficient to encourage private before-tax expenditures on education. Moreover, even if the private market incentives exist, the problem of financing the investment in human capital by the student and his family may be overwhelming. Even if the expected discounted future returns from education exceed their current costs, if the student cannot meet the current costs, he will be unable to undertake this expected profitable investment in human capital. And there are good reasons in the real world why such financing may be close to impossible for many families!

Primarily, because of the sociology of the family, children of the same family all reach the college attending age within a few years of each other. Thus, the investment in college education for each family is bunched in a few years leading to inordinate demands for financing in a very short period. Even upper middle income families find it difficult, or near impossible, to send two or three children to college at the same time. Only the very rich-or paradoxically the very poor who are eligible for all sorts of scholarships-may be able to afford this. The very large middle class--those earning incomes between say $15,000 and $75,000— find the bunching of college costs staggering, and with the inflation of the last ten years it would have been impossible for such families to make sufficient

financial provision for a college education while their children were growing up. Student loans are to some extent helpful, but with the arbitrary limits on maximum loans per annum set years ago (before the recent high inflation rates), these loans are less helpful in financing than they were in the past. (For example, banks in my home town normally loan a maximum of $1500 per year on student loans, while it costs over $7000 a year for tuition, books, fees, room and board to send a student to Princeton University, and even at Rutgers-the State University of New Jersey where tuitions are low-the cost for in-state students to attend is in excess of $3500.)

This suggests a second excellent reason for a tuition tax credit-equity considerations. For the cost of college is particularly crushing to middle income individuals—those blue collar and white collar, law-abiding, tax-paying families who earn their income by their own labor, and who are unable to take advantage of tax shelters, or to hide property, income, etc. These are also the people to whom a tuition tax credit would be a real boon.

Of course, there are other good reasons for a tuition tax credit, e.g., it is highly effective as an employment stimulating device per dollar of tax credit. Since education is a labor intensive industry to the extent the credit stimulates additional purchases, jobs at all levels, faculty, secretarial, maintenance people, etc. will be created directly, while jobs in publishing and printing industries, educational equipment, construction, etc. indirectly. Finally, within a few years, industry will have a larger more informed labor force to man its engines of prosperity.

STATEMENT OF JOHN J. REILLY, PRESIDENT, ASSOCIATION OF CATHOLIC
TEACHERS AFT No. 1776, AFL-CIO

My name is John J. Reilly. I am President of the Association of Catholic Teachers, the first and largest Catholic Teachers Union in the country. We are affiliated with the American Federation of Teachers and the AFL-CIO. I represent 1200 lay teachers in the 30 Archdiocesan high schools of Philadelphia and one high school in the Diocese of Trenton, New Jersey. Our organization is presently actively engaged in obtaining recognition for some 2300 lay teachers in Diocesan elementary schools. We have, over the past 10 years, also been involved with numerous other Catholic Teacher Organizations throughout the country from New York City to Los Angeles, California. We offer this to show that our personal experience is not restricted solely to the Philadelphia area. I am also a parent and a taxpayer residing in Chester County, Pennsylvania.

There can be no denying that the Tuition Tax Credit plan presently being considered is important, controversial and emotional. Education in this country, whether public or private, is faced with a crisis of major proportions at every level. The question is how best to address ourselves to these problems so that all students whether in the private or public sector will receive the best education this country can offer. To this end, our collective efforts should be directed.

It is unfortunate to hear statements that give clear indication that there are those among us who even at this critical stage make every effort to continue to disenfranchise a significant number of American parents and students. Their thrust stems not from fact or logic, certainly not from constitutional language, and most assuredly not from justice or need. I refer to those thousands of disenfranchised students attending non-public schools, particularly religiously-affiliated schools, who are in effect being treated as second-class citizens. Public school advocates would have us believe that the Tuition Tax Credit would reward those who have abandoned public schools. They raise the spectre of fear that if this legislation is passed, there will be a mass exodus from public schools. Yet, they ask us to accept such statements without offering anything to support such allegations. Why, one wonders, do they ignore history-a history which shows private and religious schools as a part of the American scene from Colonial Times, schools which flourished side by side when the public schools finally became part of the American educational scene in the 19th Century.

The long and rich tradition of Catholic schools in Philadelphia began in 1770. Today, these schools enroll some 185,000 students. It is a System of elementary and secondary schools that in size has few equals in the country; a System that is not only concerned with ever-dwindling resources but is also attempting to meet the problems of urban people. The number of students in Archdiocesan city schools is 100,000 with over 25,000 of them enrolled in inner city schools.

There are also over 24,000 non-Catholic, Black and Spanish-speaking students enrolled. It is a System that relies, not as some would have you believe on the upper middle and wealthy classes for its students and financial support but rather on that class of citizens who traditionally have been the solid bedrock of America. The lower middle class, the working people, the blue-collar worker. The class of Americans, as no other, upon whose shoulders the tax burden falls, who feel the inflationary spiral more acutely, as they see whatever gains they have made more than offset by their lack of purchasing power.

These are the citizens who hold firmly to the American Dream of a better education for their children, a dream that also states that when there is injustice, democracy will right it. They also believe that they have a right to select schools of their own choosing, a right upheld by the United States Supreme Court. These are also the citizens who find that to exercise that right they must bear a double burden of paying ever-increasing taxes to support public schools while faced with increased tuition costs at their own schools. They are, in effect, being penalized.

It is time to question, I believe, how a constitutional right can be so badly eroded as to be meaningless or destroyed? If the freedom to exercise a right is not available, where then is the right?

There is another aspect of this problem that should not be ignored. What happens if those who presently support non-public schools reach a point where it is no longer possible to continue contributions or meet tuition costs. I am sure we are all aware that taxpayers across the country are voting down school budgets forcing early school closings and reduced services. In other areas, there have been near taxpayer revolts over increased property taxes. How then can anyone ignore the potential cost in dollars to offset the possibility of non-public school students being forced into public schools?

In the Philadelphia area, if students in non-public schools were forced to attend public schools, a conservative cost figure based on the 1976-77 cost per pupil in public schools would show an additional cost in excess of $300 million a year necessary for public school budgets. That cost does not reflect the full amount, since there would be a need for buildings, transportation, supplies, and additional teachers to accommodate the influx of new students.

One can only ponder the consequences of such an increase. One should also think about the loss of diversity and pluralism that have historically benefitted the educational sector. It is strange that competition which has been a mainstay of the American economy, enabling America to flourish and grow strong, should be considered bad when it comes to education. Should one not fear more a monolithic educational system which history has shown as not always fostering the free exchange of thoughts and ideas?

We wish to emphasize the importance of a Tuition Tax Credit that includes elementary, secondary, college, trade and vocational school students-across the board relief to those who must pay tuition in either public or private schools. We strongly urge that elementary and secondary schools be retained in the legislation. Recent court decisions have shown that so long as aid is not directed toward a particular class or religion, then the courts are more likely to view such aid in a favorable light, if challenged. If the Congress were to pass legislative aid only to colleges, it is unlikely that elementary and secondary schools could be added at a later date.

It is interesting to note that one of the greatest aids to education in America was the GI Bill which enabled thousands of Americans to attend schools of their own choosing, including religious institutions with monies from taxes. This legislation was never challenged on constitutional grounds and I feel that the present Tuition Credit legislation is of like character.

In the most recent documented study of Catholic schools by Father Andrew Greeley, Catholic Schools in a Declining Church (1976), two factors other than the general decline in the birth rate are pointed to as reasons for declining enrollment in Catholic schools: lack of schools (new schools not being constructed in those areas into which Catholics are moving) and increasing tuition. Of these two, I believe, and it seems true in Philadelphia, that increasing tuition is taking its toll. With ever-increasing taxes and inflation, the mounting tuition costs are forcing people who would normally have opted for Catholic schools to face decisions of far-reaching implications. If they place their children in nonpublic schools now, what will the financial burden be 4, 6, 8 years from now? Will they have to take their children out of non-public schools because of increasing costs? Would it not be better if rather than pay tuition now in the elementary

and secondary years, the parents saved the money for college? Parents have even told me that they can only afford one child in non-public schools. If you were faced with that decision, which one of your children would attend non-public school while the others were enrolled in public schools. In all of these decisions, the underlining question for parents is how to compensate for the loss of a value-oriented education offered by Catholic schools if their child must attend a public school.

There is another class of citizens that will be affected by the outcome of this legislation-the Lay Teachers who in increasing numbers staff Catholic schools. These teachers along with their religious colleagues believe enough in Catholic schools to work with a minimum of the frills found in public schools while performing an outstanding job of teaching the basics and helping to shape the character of their students in a value-oriented system. The caliber of their work can be attested to by the National Test Scores which show their students to be above the national norm. But lay teachers are faced with a grave decision. How long can their dedication to non-public schools continue to take precedence over the financial needs of their families as they see salary and benefit increases for their public school colleagues move further and further ahead. The loss of such teachers can be extremely detrimental to any school system.

In closing, I wish to stress again the importance of Tuition Tax Credit legislation for all levels of education. I would not like to see the words of Chief Justice Marshall, "The power to tax is the power to destroy," become a reality for nonpublic schools.

I wish to thank the many members of the Committee on Ways and Means who so courteously replied to our letters of concern on this legislation. I would also like to express my appreciation to the Committee for the opportunity to appear and present the position of the Association of Catholic Teachers.

STATEMENT OF CHARLES E. GRASSLEY

Mr. Chairman and Members of the Committee, I thank you for holding hearings on this important subject and for the opportunity, both for myself and for the many of my constituents who have written to me, to testify in favor of tuition tax credits.

National figures point to escalating increases in higher education costs. The situation is no different in my own State of Iowa. Over the past four years tuition at our state universities has increased by more than 20%. At private two and four year institutions, those increases have amounted to more than 30%.

Rising higher education costs are a national issue. They can best be treated on a national level. I want to emphasize that it is not only the citizens from the large cities and more populous states which will benefit from the passage of tuition tax legislation, but all citizens across the country.

In approving tax credits for tuition and related educational fees, we are not only helping many to go to the school of their choice but we are encouraging many to seek higher education who would not otherwise consider it because of cost. We must remember that the proliferation of knowledge and this country's progress-both increasing in geometric proportions-have not occurred independently. Rather, each has contributed to the other.

Education is an investment. Those with higher education receive higher salaries, they receive more frequent promotions, and they eventually rise to higher levels of employment. In recommending that tax credits be given to those who invest in education, we are merely promoting consistency in the tax code which allows special treatment for productive investment when the real beneficiary of that investment is the public.

As inflation eats away at the real and disposable incomes of our citizens, investment in higher education is more and more difficult. Our children are our most valuable asset, and their minds America's greatest resource. We should actively encourage them to pursue higher education and tuition tax credits will do just that.

Tuition tax credits will not solve the problem of increasing costs in post-secondary education. But the program will ensure that a greater number of young men and women will have greater opportunity to learn, and none can deny the value of an educated public. Disraeli said it of England years ago, but it is just as true in America today that, "upon the education of this country, the fate of this country depends".