[Congressional Record Volume 143, Number 56 (Monday, May 5, 1997)]
[Extensions of Remarks]
[Pages E832-E833]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




         H.R. 1512, THE EDUCATION OPPORTUNITIES TAX ACT OF 1997

                                 ______
                                 

                         HON. CHARLES B. RANGEL

                              of new york

                    in the house of representatives

                         Thursday, May 1, 1997

  Mr. RANGEL. Mr. Speaker, today, I am introducing legislation, 
entitled the Education Opportunities Tax Act of 1997, which consists of 
tax provisions that are designed to expand educational opportunities in 
this country.
  My bill would expand opportunities for students in K-12 and beyond. 
This goal is crucial to the country's social and economic well being. 
It's a well known fact, that without the proper educational tools, 
young people lose hope for the future. We have only to look at the high 
levels of crime, drug use, juvenile delinquency, teen pregnancy, and 
unemployment to know the value of a good education. Without basic 
academic opportunities, the future is bleak. My bill identifies 
communities that shoulder a disproportionate share of these social 
problems and offers a solution for hope.
  The bill that I am introducing today is based largely on education 
tax incentives contained in the President's budget recommendations. My 
bill modifies the President's proposals in two major ways. Both 
modifications reflect many meetings with education providers and the 
business community over the last several years.
  First, I believe that providing additional financial resources to 
assist families in meeting the cost of higher education is vitally 
important but not enough. We must do more to ensure that those students 
who wish to pursue higher education are prepared for the challenges of 
a college education. We also must work harder both to educate and train 
those students who choose or need to earn a full-time living after high 
school. In pursuit of this goal my bill would permit qualifying 
educational institutions to make this a reality. Therefore, my bill 
includes provisions to enhance academic achievement below the college 
level through public-private education partnerships. I believe that we 
must have greater private-sector involvement in our educational system, 
and my bill contains tax provisions designed to encourage that 
involvement. Those tax provisions, called education zone tax 
incentives, are based on the principles of public-private partnerships 
that underlie the empowerment zone legislation.
  Second, I believe that a revised Hope scholarship credit is the most 
effective way of using the tax law to help families meet the cost of 
higher education. Therefore, rather than including the other education 
tax incentives proposed by the President in my bill, I have proposed an 
expansion of the President's HOPE scholarship credit and made 
modifications to it to ensure that all students, regardless of their 
family incomes, will receive the full benefit of the credit. In 
addition to the $1,500 credit for each of the first 2 years of college 
as proposed by the President, my bill provides a $1,000 credit for the 
third and fourth years of college education. The dollar limitations 
would not be reduced by the amount of Federal grants such as Pell 
grants, and the student would be required to maintain satisfactory 
academic progress to be eligible for the credit.
  The HOPE scholarship credit, as originally proposed by the President, 
would have been refundable and available to low-income families who 
would not have income tax liabilities. The refundable aspect of the 
credit was eliminated in the President's fiscal year 1998 budget 
proposals because of concerns over the difficulty of administration by 
the Internal Revenue Service. I believe that no family should be denied 
the HOPE scholarship credit merely because its family income is too low 
and, therefore, I have provided a refundable HOPE credit in my bill for 
students from such families. I believe that I have addressed the 
concerns that caused the President to eliminate the refundability 
feature of the HOPE credit. In my bill, the refundable portion of the 
credit would be paid by the educational institutions on behalf of the 
Treasury Department in a manner similar to that used for other Federal 
assistance.
  Although the bill that I am introducing today contains only tax 
provisions, I recognize that tax provisions alone cannot provide 
sufficient additional resources needed to assist students in obtaining 
a higher level of education. Therefore, I have also cosponsored two 
bills, H.R. 1435 and H.R. 1436, introduced by Representative Bill Clay 
on April 24, 1977. Those bills would expand the Pell grant program, 
reduce student loan fees, and provide school construction funds.
  Although our proposals may differ, President Clinton and I share the 
same goal. We both believe that a lack of resources should not prevent 
any American from receiving a college education. A college degree is 
increasingly vital in our society. Government can and should play an 
important role in ensuring that all Americans have access to higher 
education. I firmly believe that expanding educational opportunities is 
the most efficient way of ensuring equal opportunities in our society.
  Currently, this Nation is enjoying one of the longest periods of 
economic expansion in its history, with low unemployment and continued 
creation of new jobs. Much of the credit for that rests with the 
deficit reduction efforts of the Clinton administration and the 
technological advantages that our industries enjoy over their 
competitors in other countries.
  We will not remain competitive in the world economy unless we invest 
in our human capital to maintain that technological advantage. Any 
resources available after deficit reduction should be invested in human 
capital. A recent survey of economists by the Wall Street Journal found 
that 43 percent of the economists surveyed stated that increased 
spending on education and research and development would be the one 
policy with the most positive impact on the economy.
  Amazingly, while the concept of investing in human capital goes 
unchallenged in debate, elected leaders are still spending more of our 
Nation's limited budget resources on back-end, punitive programs like 
law enforcement and prisons, rather than front-end investments like 
education and training that can really pay off in increased work force 
productivity.
  Unfortunately, these skewed priorities are present at the local 
level, too. New York City spends $84,000 per year to keep a young man 
in Riker's Island Prison, yet only $7,000 each year to educate a child 
in Harlem.
  We must change our priorities. Let's invest in the future of this 
country through our children. Let's bring the same zeal to encouraging 
and educating our children that we now apply to punishment and 
incarceration.
  The following is a brief summary of the provisions contained in my 
bill:

                     1. Public-Private Partnerships

       The bill contains a financing mechanism designed to provide 
     needed capital and expertise to establish partnerships 
     between public educational institutions and private 
     businesses.
       (a) Local governments would be authorized to issue special 
     bonds (or otherwise borrow money) to cover the cost of 
     establishing specialized academic institutions. These 
     institutions would have to be located in empowerment zones or 
     enterprise communities or primarily serve disadvantaged 
     students. Because of the tax credit described in subparagraph 
     (b), this capital could be raised with no interest cost to 
     the local government. No bonds could be issued for any school 
     unless there were assurances of private business 
     participation described in subparagraph (c). The required 
     private business contributions and the terms governing the 
     financing would be designed so that each member of the 
     partnership would provide equal contributions.
       (b) The Federal Government would provide a tax credit to 
     purchasers of the special bonds (or holders of other evidence 
     of indebtedness) described in subparagraph (a). The credit 
     would be paid annually in an amount equal to a percentage of 
     the bond (or indebtedness) face amount that would permit the 
     raising of interest-free capital by the local government. 
     There would be an overall national limit on the amount of 
     financing eligible for the credit. The annual limitation 
     would be $6 billion for 1998, 1999, and 2000. In order to 
     avoid creating a tax-exempt bond with a substantial Federal 
     guarantee, the credit would be included in income of the 
     recipient and subject to tax.
       (c) In order to be eligible for the special interest-free 
     capital, the local government would have to secure written 
     assurances of contributions from private business. Such 
     contributions could consist of goods, expertise, training, or 
     services. The businesses would benefit from current-law 
     deductions for charitable contributions.
       The bill also provides a tax credit to employers for hiring 
     recent graduates of the schools established through these 
     partnerships. The amount of the credit would be 20 percent of 
     the first $6,000 of wages paid during the first year of 
     employment if the student is hired before a 6-month period 
     after graduation.

[[Page E833]]




                     2. hope scholarship tax credit

       The bill includes a nonrefundable and a refundable HOPE 
     scholarship credit. The nonrefundable credit would be claimed 
     by taxpayers on their income tax returns if they have 
     sufficient tax liability to fully utilize the credit. This 
     credit would be administered by the Internal Revenue Service. 
     Taxpayers with incomes too low to receive the benefit of the 
     full amount of the nonrefundable credit would be entitled to 
     a refundable HOPE credit. The refundable credit would be paid 
     by the institution at which the student is enrolled under 
     procedures similar to those used in providing other Federal 
     educational assistance.
       For the first two years of college, the maximum amount of 
     the credit would be $1,500 for a full-time student and $750 
     for a half-time student. For the third and fourth years of 
     college, the maximum amount of the credit would be $1,000 for 
     full-time and $500 for half-time. The limitations will be 
     indexed for inflation.
       The credit would be available for the first four years of 
     post-secondary education. A part-time student would have to 
     be at least a half-time student for the year.
       The credit would be available on a per-student basis. To be 
     eligible for the credit, the student would have to maintain 
     satisfactory academic progress and remain ``drug free'' (not 
     convicted of a felony involving drugs).
       The credit would be available for qualified expenses 
     incurred by the taxpayer, taxpayer's spouse, or taxpayer's 
     dependent (as defined in Code section 151). Qualified 
     expenses consist of tuition and fees required for enrollment 
     or attendance. The credit would not be available to married 
     taxpayers unless they file a joint return, and would not be 
     available to nonresident aliens.
       Expenses for this purpose would be net of grants, 
     scholarships, and fellowships. Pell Grants and other 
     nontaxable Federal scholarship assistance would not reduce 
     the dollar limitation on the credit but like other 
     scholarships would be offset against qualified expenses in 
     determining the amount of credit.
       The credit would be phased out over the following adjusted 
     gross income levels: Joint filers, $80,000-$100,000; and 
     Unmarried filers, $50,000-$70,000 (indexed for inflation 
     beginning in year 2000).
       The credit would be effective for expenses paid after 
     December 31, 1996, for education furnished in academic 
     periods beginning on or after July 1, 1997 (the beginning of 
     the 1998 academic year).

     

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