[Congressional Record Volume 142, Number 101 (Wednesday, July 10, 1996)]
[Extensions of Remarks]
[Page E1234]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         TAX CUTS FOR EDUCATION

                                 ______
                                 

                          HON. LEE H. HAMILTON

                               of indiana

                    in the house of representatives

                        Wednesday, July 10, 1996

  Mr. HAMILTON. Mr. Speaker, I would like to insert my Washington 
Report for Wednesday, July 10, 1996, into the Congressional Record.

                         Tax Cuts for Education

       There has been a lot of talk about tax cuts in recent 
     weeks, some of it responsible and some not. But one idea that 
     appears to me to have considerable merit is tax cuts for 
     education and skills training expenses--tax cuts that are 
     targeted toward middle-class families and are fully paid for 
     so they don't worsen the budget deficit.


                     improving education and skills

       One of the greatest concerns of Hoosiers is their long-term 
     job prospects and the prospects for their children. They work 
     hard--often with both husband and wife employed--but they 
     haven't seen many raises in recent years. So they struggle 
     every month to pay their bills, keep their family healthy, 
     and save a little for education or retirement. They are 
     particularly concerned about the impact of technology in the 
     workplace and foreign competition. They rightly recognize 
     that with many jobs being made obsolete or moving across 
     borders to lower-wage countries, they will need to improve 
     their job skills just to keep up. And they recognize that a 
     good education and solid work skills will be even more 
     crucial for their children's prospects in the workforce of 
     the future.
       Local business leaders express similar concerns about the 
     need to improve education and skills training. In meeting 
     after meeting they tell me that the single most important way 
     to expand businesses and create new jobs in southern Indiana 
     is to upgrade the skills of the workforce.
       Education is certainly the key to opportunity, especially 
     in today's tough new global economy. Good jobs, including 
     many factory jobs, demand much more sophisticated skills. And 
     fully half of the new jobs created in the U.S. in the last 
     three years were managerial and professional jobs. People 
     entering the workforce today need better and better 
     computation, communication, problemsolving, and 
     decisionmaking skills, and they should be comfortable with a 
     lifetime of learning so they can master new skills and adjust 
     to new technologies in our constantly changing economy. 
     Workers who develop these better skills will be in high 
     demand by employers as we move into the 21st century; those 
     who do not will not. We are already seeing this premium on 
     education and skills. People with college degrees today earn 
     almost twice as much as their counterparts with only a high 
     school diploma.


                                 costs

       Yet while many Hoosiers recognize the need for them and 
     their children to upgrade their education and training to get 
     ahead, they find that increasingly expensive to do. The cost 
     of college has risen sharply in recent years, with tuition 
     increasing 270% since 1980. Good programs are available not 
     just at four-year colleges but at community colleges, 
     postsecondary technical schools, and regional campuses, yet 
     the costs can add up. With tuition increases expected to 
     continue to outpace inflation in the years ahead, many 
     families are worried.


                           Targeted Tax Cuts

       So an idea getting attention in Washington is targeted tax 
     relief to help moderate income families improve their 
     education and skills levels. Congress is currently working on 
     restoring the tax exemption for tuition assistance provided 
     to workers by their employer, but several broader measures 
     have been proposed. One idea is to offer students or their 
     parents a tax deduction of up to $10,000 for college or 
     vocational training. Another proposal is to expand Individual 
     Retirement Accounts (IRAs) and allow them to be used for 
     post-secondary education expenses. A third proposal is to set 
     up Individual Training Accounts to allow workers to 
     continually upgrade their skills. Finally, a $1,500 per year 
     tax credit has been proposed to help pay for the first two 
     years of college tuition. This would basically cover tuition 
     at most two-year community colleges.
       I believe targeted tax relief for education expenses makes 
     sense. It addresses a real national concern--improving the 
     education and skills training of our workforce--and it 
     expands opportunity by giving a leg up to people who 
     genuinely want to get ahead and are willing to make the 
     effort. In addition it provides some needed tax relief to 
     middle-class families--families who have struggled to get by 
     in recent years while those at the top in America have 
     prospered. Those who want to direct new tax cuts largely to 
     people at the top seem to me to have their priorities wrong.
       The U.S. tax code currently provides major tax breaks for a 
     variety of purposes, including the purchase of a home, health 
     care, retirement savings, and business investment in new 
     plants and equipment. But it provides very little for the 
     investment families should be making in improving their 
     education and skills. That is a disparity that needs to be 
     addressed.


                             How to Set Up

       But such tax relief must be structured in the right way. 
     First, it must be used for legitimate education and training 
     expenses. To ensure that the money is not wasted, we should 
     require that the study be at schools that are properly 
     accredited and certified. Also, local businesses could 
     provide helpful guidance on what skills and types of study 
     they see as most useful and relevant.
       Second, the tax breaks must be targeted to those who need 
     the most help. We need to place an income ceiling on 
     eligibility, with the benefits phased out at higher income 
     levels. We simply can't afford to give the tax break to well-
     to-do families who already are able to pay for post-secondary 
     education. We also need to structure the tax breaks so they 
     include tax credits and not just tax deductions, since most 
     moderate income people don't itemize their taxes and thus 
     wouldn't benefit from tax deductions.
       Third, it is essential that any such tax relief be paid 
     for. The costs to the Treasury should be fully offset by 
     savings elsewhere, by cutting less important spending or tax 
     breaks. And these offsetting savings should be made today, 
     rather than promised several years down the road. We have 
     made major progress in recent years in cutting the budget 
     deficit--reducing it from $290 billion four years ago to 
     around $130 billion this year. We simply shouldn't give up on 
     deficit reduction by giving out tax cuts that are not paid 
     for. We need to press on to a balanced budget.


                               Conclusion

       Congress should begin work soon on such a targeted tax cut, 
     but completing action will be difficult this year, especially 
     as we enter the increasingly partisan election season. But 
     such tax relief should be at the top of next year's agenda. 
     We need to review the tax code--to make it simpler, fairer, 
     and more rational--and one important component of that effort 
     should be expanding targeted tax cuts for education and 
     training.

                          ____________________