[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
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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.
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