[Congressional Record Volume 143, Number 150 (Friday, October 31, 1997)]
[Senate]
[Pages S11503-S11511]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
EDUCATION SAVINGS ACT FOR PUBLIC AND PRIVATE SCHOOLS
The PRESIDING OFFICER. Under the previous order, the Senate will now
resume consideration of H.R. 2646, which the clerk will report.
The assistant legislative clerk read as follows:
A bill (H.R. 2646) to amend the Internal Revenue Code of
1986 to allow tax-free expenditures from education individual
retirement accounts for elementary and secondary school
expenses, to increase the maximum annual amount of
contributions to such accounts, and for other purposes.
The Senate resumed consideration of the bill.
The PRESIDING OFFICER. The time until 10:30 a.m. will be divided
between the Senator from Georgia [Mr. Coverdell] and the minority
leader, or his designee.
The Senator from Georgia.
Mr. COVERDELL. Mr. President, I rise on behalf of H.R. 2646, the A-
plus education bill. What has become known as the A-plus account, or
education savings account, is a unique instrument that is being
designed to help American families across the land to deal with
education deficiencies, particularly in grades K-12, kindergarten
through high school, although the account may be kept intact and used
for higher education if that is the desire of the family.
Simply put, a family could save up to $2,500 every year from the
child's birth in a savings account much like an IRA that most Americans
have come to understand, a similar instrument. These are after-tax
dollars. The interest that would build up each succeeding year would
not be taxed if the proceeds of the account are used for virtually any
educational purpose. So it becomes a tool that empowers parents to deal
with particular or peculiar deficiencies of the child.
As a result, my own view is that the value of these dollars could be
as much as three to five times a typical public dollar being spent
because the dollar is being directed at the unique deficiency.
Let's say, for example, the child had a learning disability, or
dyslexia, that required special attention. The dollars could be put
right on that problem. Or perhaps the child had a math deficiency and
it required a tutor, or there was a transportation problem to deal with
an after-school program, or a learning disability of some form. All of
these particular problems, broad dollars cannot necessarily address,
but these savings accounts can. They can go right to the deficiency.
A unique feature of the savings account is that the account can
receive contributions from sponsors. When you do that, the imagination
begins to work at the different kinds of things that could happen to
help build this account up for this child. A corporation, an employer,
could be a contributor to
[[Page S11504]]
these accounts. You can envision matching circumstances, where an
employer would say I'll put so much in your children's account if
you'll match it. You can imagine a church becoming involved in these
types of accounts. I can see a community--recently in Atlanta we lost a
law enforcement officer, and people are often trying to find a way to
help the remaining family. I can see communities stepping forward in
this case and establishing an account for the surviving children. So
community, employers, extended family, brothers, uncles, neighbors,
grandparents--all of these individuals could become sponsors of these
children's accounts.
As a result, a large infusion of enrichment will occur to education
in America, one of the largest in 10 years--billions of dollars. The
Joint Committee on Taxation has advised us that 14 million families
will make use of these accounts--14 million families. A quick
estimation there shows you somewhere around 20 million-plus children,
approaching half of children in America's schools, will be
beneficiaries to some degree of these accounts.
It baffles me that some in the professional system, the National
Education Association, oppose this. They want to believe and others to
think that--I think the line is that it only will help wealthy people
and that it will only support religious schools. Both assertions are
utterly false.
I have been stunned by an organization of this character being so
misleading about a matter of public policy. You would think that an
organization associated with schooling and role modeling for young
people could do a little better job of being candid and straightforward
about their opposition. It has had some effect, because many people
think the savings account is the equivalent of a voucher. A voucher--
which I support; they don't--but a voucher is the redistribution of
public money. In other words, the money raised from the public for
taxes, property taxes or the like, is given to the family and they can
move it to any point they would like. That is a voucher. This is a
savings account. This is not public money. This is private after-tax
money. And we are not taxing the buildup.
Under their definition of public money, I guess the capital gains tax
reduction would be a voucher because we have left money in someone's
checking account and they can use it some way they choose. But, in any
event, the allegation is that it is for the wealthy and that it
supports religious schools.
Here are the facts. According to the Joint Committee on Taxation, of
the 14 million families that will use these accounts, 10.8 million of
them will be in families whose children are in public schools; 70
percent of the funds generated, this enrichment, this additional effort
and energy coming behind our school system, private and voluntary, will
go to support public schools--70 percent--and 30 percent to private
schools.
According to the Joint Committee on Taxation, 70 percent of all these
funds will go to support children and families earning $75,000 or less.
It is means tested. It is not for the wealthy. It has sponsors, so that
we can help those who have a tough time organizing the accounts, and
the principal beneficiary will be the public school system of America
and the families in it.
Mr. President, I yield at this time.
The PRESIDING OFFICER. The Senator from New York is recognized.
Mr. MOYNIHAN. Mr. President, let me first congratulate my friend and
colleague on the thoughtfulness of his remarks and the cogency of his
arguments. If I will now speak in opposition, it is first and foremost
a procedural opposition and jurisdictional one, having to do with bills
sent from the House of Representatives and held at the desk and not
referred to the Committee on Finance.
Mr. COVERDELL. I appreciate that.
Mr. MOYNIHAN. And also having to do with the season of the year.
Mr. COVERDELL. I appreciate the general remarks.
Mr. MOYNIHAN. Mr. President, in an op-ed article in the New York
Times on Tuesday, Richard Leone, who is the president of the 20th
Century Fund, an eminent New York City institution, remarked, ``Last
week, the House of Representatives took time out from beating up on the
Internal Revenue Service to approve a fresh tax loophole.''
I have had occasion to comment that on July 31, when we voted 92 to 8
to approve an 820-page addition to the Internal Revenue Code, the only
copy of the bill in this Chamber was in the possession of our most
distinguished tax counsel, Mr. Giordano.
Somewhat furtively, Members would come up and ask if they could just
check whether their provision was in the bill. We might have charged
for that service. We did not, in the public spirit of the occasion. But
it was no way to legislate taxation.
In that spirit, I simply want to say that neither, at this time and
in this manner, ought we to be approving a new provision providing for
expansion of IRA's that would cost us $4 billion over 10 years. That is
in addition to the $38 billion in new IRA's which we passed on July 31.
There was an education IRA, and I am happy to say a Roth IRA. Our
distinguished chairman is to have the satisfaction, I hope it is, of
seeing in bank windows around the country, ``Roth IRA available for
purchase,'' which people will be wise to do.
The tax legislation for this session of the 105th Congress is
concluded. We will resume next year. I hope we don't resume with too
much energy. It is a fact that we impose upon the Internal Revenue
Service, and upon the citizenry much more than the Internal Revenue
Service, incredibly complex measures which defy assessment in so many
cases. And we do it while calling for the repeal of the Internal
Revenue Code and the abolition of the IRS. Well, I can understand the
calls that issue from the House of Representatives to abolish the IRS,
because increasingly its task is impossible. But on the other hand,
there is something called the Nation and it does require revenues. Even
if they are reduced to that elemental proposition of delivering the
mail and defending the coasts, that does require revenues. The choices
are for us many and we shouldn't complexify them to the point of plain
bafflement.
The President has said he will veto this bill. Our President, in a
letter to our distinguished majority leader of July 29, thanked the
majority leader and, by reference, the others of us in conference on
the Tax Relief Act of 1997, for the bipartisan way in which we were
putting that legislation together, but he did say he would strongly
oppose the measure of the Senator from Georgia. So, accordingly, that
was taken out in conference in order for the whole bill to be approved.
I ask unanimous consent that the President's letter be printed in the
Record.
There being no objection, the letter was ordered to be printed in the
Record, as follows:
The White House,
Washington, July 29, 1997.
Hon. Trent Lott,
Majority Leader, U.S. Senate,
Washington, DC.
Dear Mr. Leader: I want to again thank you for working in a
productive, bipartisan manner to develop this bipartisan
budget agreement. I feel particularly good about the strong
education package that is included in the tax bill. As you
know, in working out the final agreement, I strongly opposed
the Coverdell amendment. I would veto any tax package that
would undermine public education by providing tax benefits
for private and parochial school expenses.
Sincerely,
Bill Clinton.
Mr. MOYNIHAN. I thank the Chair.
One further point. After a very great deal of effort and not
inconsiderable amount of pain, we have brought the Federal budget into
balance. I stood here in 1993, or rather my good friend, now Ambassador
to China, Mr. Sasser, as chairman of the Budget Committee, stood here
and I stood there as chairman of the Finance Committee, and in a very
close and dramatic moment, we got the required 51 votes to enact what I
have since acknowledged to be the largest tax increase in history. But
it broke the back of the expectation that we could never handle our
finances, that interest rates had to be high, the inflation premium
attendant on the probability that we would end up monetizing the debt
because we couldn't pay for it. Monetizing is a term by which you
inflate the currency and lower the cost of the debt.
We did it, and the deficit has gone down. We have this most
extraordinary, unprecedented, somewhat difficult-to-comprehend
situation of full
[[Page S11505]]
employment, low inflation, low interest rates, high productivity.
Fuller employment than we ever thought was compatible with the interest
situation. We are in a new economic setting, and by March, I would
think, the continued revenues to the Treasury would be such that the
deficit will have disappeared.
We have talked about the deficit, not always in the calmest tones,
for a decade now. We finally balanced the budget, and what do we
suddenly see? More and more proposals for cutting taxes through one
form or another, losing revenue so we will get the deficit back again.
Mr. President, the time is at hand, if I may say, to use the deficit
to reduce the debt. We now spend almost as much money on interest
payments as we do on defense. That is not a proportionate set of values
of interests, of priorities. We ought to start reducing the debt. For
every dollar of public debt that we reduce, we get $1 of private
savings, private investment, which, in turn, will produce revenue, and
on one hand, it will reduce costs of interest payments, and on the
other hand, it will increase revenue. We are short of savings. I know
the concern of the Senator from Georgia is savings, but at this moment,
I would like to say we will take this up next year. This has not been
referred to the Finance Committee. It is a House measure held at the
desk in the last hours of the first session of the 105th Congress. I
hope that we will put it off until next year when it will receive a
goodly consideration. I can't say I know this to be Chairman Roth's
intention, but I cannot doubt it is his intention, such as it is his
manner in all these issues.
But to say again, the measure before us would spend $4 billion over
10 years to increase the contribution limit for education IRA's from
$500 to $2,500 per year, provide for tax-free build-up of the earnings
in such accounts, and tax-free withdrawals for an array of expenses
relating to elementary and secondary education. The bill comes to this
floor directly from the House; it has not been considered by the
Finance Committee.
With great respect to the sponsor of the bill, the distinguished
Senator from Georgia, I do not believe the Senate should take up this
legislation at this time. It was just 3 months ago that we passed the
Taxpayer Relief Act of 1997, which included a net tax cut of $95
billion over 5 years and $275 billion over 10 years. At a cost of $38
billion over 10 years, that act created the education IRA and the Roth
IRA, and significantly expanded existing IRA's and the tax benefits of
State-sponsored prepaid college tuition plans. And now, we are asked to
expand those recent IRA changes even further.
As well intentioned as this legislation is, surely there are many
other priorities that should take precedence if we are serious about
doing something for education. Priorities that have been thoroughly
considered in the Finance Committee and by the full Senate. One such
priority is the income exclusion for employer-provided educational
assistance, which is Section 127 of the Internal Revenue Code. It is
probably the single-most successful tax incentive for education we
have. In the tax bill that emerged from the Finance Committee in June,
we made section 127 permanent and we applied it to graduate school.
Unfortunately, when the tax bill came back from conference, this
provision was limited to a 3-year extension only for undergraduates.
Proponents of the pending legislation speak of a crisis in our
elementary and secondary schools. There is no more compelling
illustration of this than the state of the infrastructure of these
schools. During the debate last summer on the tax and spending
legislation, Senators Carol Moseley-Braun and Bob Graham brought the
issue of crumbling schools to our attention, and they continue to be
eager to address it. If we feel we must spend $4 billion, why not spend
it to insure that schools have heat this winter?
There are also tax policy concerns with this bill. First, complexity.
Even as we hear ever louder calls to scrap the code, we have before us
a bill that would create a maze of rules in attempting to define what
constitutes a ``qualified elementary and secondary education expense.''
The bill states that qualified elementary and secondary school expenses
include expenses for tuition, computers, and transportation required
for enrollment or attendance at a K-12 institution, and for home
schooling. There is no further definition. For example, would it be
possible to withdraw money from these accounts to purchase the family
car? I don't know, but you can't find the answer in the text of this
bill.
Under the bill, the ability to contribute funds for elementary and
secondary education expenses is proposed to sunset after 2002. However,
money contributed through 2002 could still be used for such expenses.
It will be up to the taxpayer to track--and the IRS to examine--when
funds were contributed, and whether they can be used for only
elementary and secondary education, only higher education, or both.
The administration estimates that 70 percent of the benefits of the
bill go to the top 20 percent of income earners, taxpayers with annual
incomes above $93,000. Tax benefits to taxpayers below that level are
estimated to be nominal. If the proponents are truly concerned about
the middle class, the tax benefits should be targeted there. In order
to accomplish this, the income limits that apply to this bill would
have to be lowered, and the ability to circumvent those limits would
have to be prevented.
Mr. President, I appreciate the good will of the sponsors of this
legislation, which we will be happy to consider in the Finance
Committee in the next season. But please let us not take up a tax bill,
of all things, in the final days of this session. This is no time for
this tax bill or any other tax bill. But if our friends in the majority
insist on going forward, I believe they will find that Senators on this
side--and doubtless on their side, too--will be ready with amendments
by the dozens.
I thank the Chair and yield the floor.
I thank the Chair for his courtesy, and I thank my friend.
Mr. COVERDELL addressed the Chair.
The PRESIDING OFFICER. The Senator from Georgia.
Mr. COVERDELL. Mr. President, I thank the Senator for his generous
remarks addressed toward me at the initial opening of his statement. I
appreciate that very much.
I now yield up to 4 minutes to my good colleague from Connecticut. I
want to just say that he, Senator Lieberman, has been at the forefront
of education reform for more years than I. He is very dedicated to
these proposals, and his support of this measure has been personally
and publicly appreciated.
The PRESIDING OFFICER. The Senator from Connecticut.
Mr. LIEBERMAN. I thank the Chair and thank my friend and colleague
from Georgia for his very kind comments. May I say, with his leadership
on this issue, he has come right to the forefront of the national
movement for education reform.
Let me say first, briefly, how grateful I am, and I know the Senate
across party lines, for the bipartisan leadership for the agreement
that was achieved yesterday on scheduling the consideration by the
Senate of campaign finance reform, which is important in its own right
because of the significance of that effort, but also important because
it frees us now to approach on the merits issues such as this.
I am proud to be a cosponsor of this Education Savings Act for Public
and Private Schools. It is a bipartisan cosponsorship, as will be clear
from those who speak on behalf of it.
Mr. President, it seems to me that of all the challenges that we have
before us as we try to make this great country of ours even greater and
spread the opportunities beyond those who have them best now, the most
important place we can invest is in education, the education of our
children.
As we look at the education system in our country, I think we can say
with some pride that the system of higher education is really doing
quite well, but that it is the elementary and secondary schools, in
making sure that our children get a good start on the road to education
and self-sufficiency, that really need help.
There are a lot of good things happening in our public and private
and faith-based schools, but too many of our kids are still being
educated in schools that are either in terrible shape physically,
schools in which
[[Page S11506]]
their personal security is threatened by crime in the schools, or
schools in which there is not adequate teaching and innovation going
on.
This measure is a classic attempt to create a partnership between the
Government and families and businesses to help people better educate
their children at the elementary and secondary level. It is a tax
incentive, a small one. It is like dropping that pebble into the lake,
and it is going to create ripples out for individual children and for
our society that I think will be dramatic.
I want to make just a few points.
This recommendation of these educational savings accounts builds
exactly on the higher education savings accounts that we adopted just a
few months ago with broad bipartisan support. In that case, you could
put $500 in. The income would be tax free, particularly if you took it
out for years in higher education. It had income limits in it for means
testing, if you will.
This proposal of ours takes that idea and simply extends it to K-12
education, with one big change--two, I suppose. One is that you can put
in not just $500 but $2,500 in and others can invest in those
accounts--grandparents, uncles, aunts, businesses. I wouldn't be
surprised, if this is adopted, that labor unions will begin to
negotiate with their employers to put matching contributions into the
savings accounts for their kids.
The point I want to make is this. A lot of anxiety and opposition has
been expressed about this proposal. It is the same proposal that most
of us voted for enthusiastically just a few months ago for higher
education. So why is it so frightening now and it was so much accepted
before? Why was it middle-class-tax relief then and it is now some sort
of giveaway to wealthy people?
I think if you focus on the merits of this, understand what
independent analysis has told us that 70 percent of those who will
benefit from this will be sending their kids to public school, that it
can be used not just for tuition payments but for a broad array of
support services--transportation, home schooling, purchasing a
computer, et cetera.
This is the kind of program that dreams are made of, that dreams are
realized from. Parents who are working hard trying to find a better way
for their children will be able to put a little money in these accounts
or have some relatives put some money in, or convince the employer to
put some money in and make it easier for them to take their children
and put them in the schools where they want them, public or private or
faith-based, or give the kids the support they need to get the better
education.
I think this is a good proposal whose time has come, and I am proud
to be a cosponsor. I thank Senator Coverdell for his leadership on
this, and I yield the floor.
The PRESIDING OFFICER (Mr. Brownback). The Senator from Georgia.
Mr. COVERDELL. Mr. President, I appreciate very much the remarks of
the Senator from Connecticut. He has made excellent points. This has
already been passed by 59 votes in the Senate. It has been passed by
the House. It is an extension of a proposal that both bodies
overwhelmingly passed. I am fearful that we are in the midst of a
filibuster attempt by special interests to block it, but we are going
to stay at it, filibuster or not.
I now yield up to 4 minutes to the distinguished Senator from
Colorado.
The PRESIDING OFFICER. The Senator from Colorado is recognized for up
to 4 minutes.
Mr. ALLARD. Thank you, Mr. President.
I thank the Senator from Georgia for yielding. And I compliment him
on his leadership, particularly on educational issues.
Today, I am here to encourage my colleagues to support legislation
which will open doors of educational opportunities to the parents and
children throughout our Nation. Education savings accounts are a
sensible step toward solving our education crisis in America by
allowing families to use their own money--to use their own money--to
pay for their child's education needs.
This bill would empower parents with financial tools to provide all
the needs they recognize in their children, needs that teachers or
administrators cannot be trusted to address in the same way that a
parent can.
These accounts would provide families the ability to save for extra
fees that they might incur, have to deal with, when they are sending
their children to public schools, fees that may be necessary to pay for
computers or maybe they want to go down and buy their own computer to
help with their child's education, maybe some tutoring needs within the
family, maybe they need to prepare for the SAT.
Transportation costs could also be an educational need, particularly
in rural areas, or maybe special circumstances that would allow a
family to consider some private alternatives as opposed to public
education.
Handicapped children, for example, I think could really benefit from
this because they do have special needs. This encourages the family of
the handicapped to meet those special needs and to pay the costs that
they may incur and still send them to a public school.
This kind of tax relief is especially important for parents who are
working two jobs with no extra time to help with homework or those who
do not feel adequate in their own knowledge to tutor their children.
As parents, I know that my wife and I were the best judges of our
children's needs, and I am proud of the way they have developed. As all
parents realize, I knew that I was in the best position to address
their needs. I would have welcomed an opportunity to accrue tax-free
interest to help pay for more opportunities in the education of my
children. Far too many parents find that their hopes to provide the
best education for their children are crushed as they realize the costs
involved in accomplishing this task.
Contrary to popular myth, 75 percent of the children who would
benefit from this bill are public school students. The new estimates
released by the Joint Tax Committee disprove the claim that public
school revenues would be reduced by what is referred to as the A-plus
accounts.
The Joint Tax Committee estimates that by the year 2000, 14 million
students would be able to benefit from this bill with 90 percent of
those families earning between $15,000 and $100,000 a year.
Mr. President, this is an important piece of legislation. It empowers
families, and it empowers them to control the education of their family
and meet their special needs. So I am absolutely thrilled with the
leadership that the Senator from Georgia is showing in this regard. If
my time is running out, I yield the remainder of my time back to the
Senator from Georgia.
The PRESIDING OFFICER. The Senator's time has expired.
Mr. ROTH. Mr. President, the respected historian and biographer,
David McCullough, recently reminded us of the importance of education.
Quoting John Adams, Professor McCullough wrote: ``Laws for the . . .
education of youth are so extremely wise and useful that to a humane
and generous mind no expense for this purpose would be thought
extravagant.''
Today we consider a law that will go a long way toward helping
parents provide educational opportunities for their children--a law
that will benefit students, whether they attend public schools or
private.
This bill, which is sponsored by our distinguished colleague Senator
Coverdell, and which has broad bipartisan support, expands the
education savings IRA. It allows families to save up to $2,500 a year,
and to use this money to pay for educational expenses for their
children attending school, from kindergarten to 12th grade.
This, as John Adams would say, is a wise bill. It is one that will go
a long way toward helping our families meet the rising costs associated
with schooling. It will go a long way toward helping our children
receive quality educations. And it will pay dividends to America,
itself, as these children--better educated and more prepared--become
the parents, educators, scientists, businessmen, and businesswomen of
tomorrow.
Not too long ago, the Finance Committee held hearings to look into
the rising costs associated with education, and the pressure those
costs place on parents and families. What we found was rather alarming.
Today, parents are under an enormous burden when it comes to paying for
education. And the costs continue to rise.
[[Page S11507]]
We designed the Taxpayer Relief Act of 1997 to help parents and
students offset some of these costs. For example:
We created an education savings IRA to allow parents to save for
higher education.
We expanded the tax-deferred treatment of State-sponsored prepaid
tuition plans.
We restored the tax deduction on student loan interest.
And, we extended the tax-free treatment of employer-provided
educational assistance.
Each of these measures will go a long way toward helping our students
and their families handle the burden associated with education.
Personally, I would have liked to see stronger measures in each of
these areas. The Senate version of the Taxpayer Relief Act actually
contained stronger provisions, and I introduced them as a separate bill
the very day that we passed the Taxpayer Relief Act.
The legislation we're considering today--which Senator Coverdell has
introduced in the Senate--is in keeping with the spirit and emphasis of
our efforts. It expands the education savings IRA that we passed in the
Taxpayer Relief Act of 1997. It allows the IRA to be used to help
families finance school-related needs for their children beginning in
their kindergarten years and covers them all the way through high
school. It raises the yearly contribution amount from $500 to $2,500.
It allows savings from the IRA to be used for both public and private
schools. For example, money could be withdrawn to pay for tuition, fees
and books for children attending private school. It could also be
withdrawn to pay for computers, uniforms, instruments, books, supplies,
and other educational needs for children in public schools. In
addition, Mr. President, this expanded IRA can be used for children
with special needs throughout their lives.
This legislation does not engender a public versus private debate. It
is fair and good for families and children who elect either form of
education. It is focused on middle-income families--those who are most
pinched by the rising costs of education. It provides these families
with the tools they need to have the freedom to select whichever form
of education they feel is best for their children.
According to estimates by the Joint Committee on Taxation, the vast
majority of withdrawn funds from these expanded IRAs will go for public
school children. Over 10 million families with children in public
schools will use these educational savings accounts, as opposed to a
little over 2 million families with children in private schools. The
expanded education savings IRA's are completely paid for, as revenue
loss will be fully offset by repealing an abusive vacation and
severance pay accrual technique.
Again, Mr. President, this legislation has strong bipartisan support.
It is good for families, good for children, and good for the future of
America. It builds on the foundation we set with the Taxpayer Relief
Act of 1997. It provides flexibility as well as opportunity, and it is
a necessary step toward providing parents with the tools and resources
they need to help their children prepare for the future.
Mr. D'AMATO. Mr. President, I rise in support of the A plus Education
Savings Accounts Act which will provide families--an estimated 14.3
million families by 2002--with the opportunity to save for their
children's education, an investment by parents for their children's
future.
Education savings accounts allow parents, grandparents and
scholarship sponsors to contribute up to $2,500 a year per child for an
account that will be used for a child's education. The interest accrued
will be tax-free as long as the funds are used to further the best
possible education for their children.
The funds saved by parents must be used for educational purposes--and
can include expenses for home computers, tutoring for children with
special needs or tuition for a private school. The money will be used
in the most efficient manner because it will be the parents who make
the decision on how to use the money.
These education savings accounts leave public resources in public
schools and let parents use their own money to augment education for
their most precious investment--their children.
This is a common sense approach--an education reform that gives
control back to parents, improving education for their children.
We must encourage parental involvement in their child's education,
and this is an excellent way to allow that involvement, making the
education system more responsive to parents.
Ms. MOSELEY-BRAUN addressed the Chair.
The PRESIDING OFFICER. The Senator from Illinois.
Ms. MOSELEY-BRAUN. Mr. President, as a member of the Senate Finance
Committee, I join Senator Moynihan in his objection to this legislation
on procedural grounds. As a member of that committee, I can attest to
the fact that we have had no hearings at all on this legislation. The
issue has not come up in committee. In fact, as far as I know, there is
no precedence for bringing a House-passed tax bill to the Senate floor
without any committee consideration whatsoever, without a single
hearing or markup, and then immediately subjecting that matter to a
vote to close off debate.
That is what this is about. If cloture is invoked, it would limit the
ability of Senators, those on the Finance Committee and everybody else,
for that matter, to offer amendments. Members of the Finance Committee,
Members of this body have not had an opportunity to offer amendments,
have not had an opportunity to debate this matter, and this vote
effectively will shut off that debate.
I have filed two amendments to this tax bill, both relating to the
issue of school repair and construction. Our buildings, as many parents
know, are literally falling down around our children. They certainly
cannot learn in those kinds of environments.
I know of other amendments that have been filed relating to a variety
of issues touching on this legislation--all amendments relevant to the
consideration of this tax bill--but, again, those Senators who have
offered those amendments will not have the opportunity to offer their
amendments if cloture is invoked.
Mr. President, I think those reasons should be enough for every
Member of this body to vote against cloture, because, if nothing else,
this is supposed to be a deliberative body, and we are supposed to have
the opportunity to talk about ideas, to really fully explore them, to
talk about them in a public way so that the people who listen to these
debates have a chance to know what it is that we are voting on. But
this bill has not had that. In fact, what it sets up is another set of
tax expenditures without any consideration of the implications or the
impacts of that expenditure.
To use the term ``tax expenditure''--for the average citizen, the
words ``tax expenditure'' do not have a lot of resonance, do not have a
lot of meaning.
I want you to think about, for a moment, spending from two
perspectives: Spending out of the front door and spending out of the
backdoor.
Front-door spending includes appropriations, and everybody can relate
to those. You see it on a bill. Bills that we pass, they say: We are
going to spend this much for that purpose or this much for that
purpose. The appropriations spending, front-door spending, is obvious.
It is apparent. The public can understand it. It is simple. Everybody
knows what the deal is, whether it is spending for a bridge or
somebody's boondoggle. Appropriations for front-door spending is
apparent and obvious spending.
This plan we are considering today goes in the other direction, of
the nonobvious spending for what is called tax expenditures. We can
debate tax expenditures for a while, but the point is, I call it
backdoor spending because essentially what it is is it is spending that
takes place when you carve out an exception for somebody who otherwise
was paying taxes, where you say everybody has to pay taxes, but as to
this little group here, taxes will not have to be paid. So that then
means that everybody else who is left has to make up that little hole
that is created. That is what we mean by loopholes. That is what we
mean by tax expenditures. And this is such a tax expenditure. This is
not only a tax expenditure, it is $4 billion tax expenditure.
I would have thought at a minimum we would have had a chance to have
[[Page S11508]]
this up in committee and have had to have witnesses testify on it and
to have at least amendments on this floor. None of that has been made
available with regard to this bill.
There are times, Mr. President, when tax expenditures really do make
sense, where we take the position that it makes more sense to say, as
to this universe of people, this little group should not have to pay
taxes, this loophole serves a legitimate function and it is an
efficient way to do or to effect whatever policy it is that we are
trying to achieve. There are some times when it is efficient.
So for a moment, for purposes of this debate, let us take a look at
the efficiency of this tax expenditure, whether or not the taxpayers
who are going to have to make up this $4 billion difference, whether or
not they will get the bang for their buck, whether or not it makes
sense for us to spend money through the back door in this way.
The truth is that this plan will benefit only the wealthy. According
to the Treasury Department, which has analyzed this proposed tax scheme
and calculated what are called its distributional effects--that is to
say, who gets the benefit of the tax benefit; what kind of bang for the
buck do you get for this spending out of the back door?--70 percent of
the benefits in this proposal would go to the top 20 percent of the
income scale, that is to say, families with annual incomes of at least
$93,222 would get the majority of the benefits in this bill. Fully 84
percent of the benefits would go to families making more than $75,000 a
year.
The poorest families in this country, those in the bottom 20 percent
of the income scale, would receive 0.4 percent of the benefits of this
spending out of the back door.
Let me say that again: 0.4 percent, less than one-half of 1 percent,
of the benefits go to the 20 percent of the population of this country
who have the least money.
These bars on this chart here really set this out. These are not my
numbers. These are Department of the Treasury's numbers. Quite frankly,
we would have had a chance to debate this had the bill come up through
committee in the normal and ordinary course of things. But since we did
not get that chance, we just were kind of surprised with having to vote
for cloture on this bill today. We have not really had a chance to
thrash through these numbers.
But anyway, the Department of the Treasury tells us that in this
legislation, the lowest 20 percent, as you can see, get the lowest
amount out of this legislation. The highest income people get the
highest amount. Families in the highest income quintile would reap $96
a year in benefits from this bill, that is to say, families with
incomes over $93,000 a year. They would see $96 of benefits in an
average year.
Those in the fourth quintile--those earning more than $55,000 a
year--would see only $32 in benefits in a given year.
Families in the third income quintile--those earning at least
$33,000--would get only $7 per year. So $7 for the middle-class
families earning between $33,000 and $55,000 a year--$7.
Families in the first and second income quintiles--those earning less
than $33,000--would get virtually nothing from this plan. And you can
see that on the chart.
So really what you wind up with is a tax expenditure that creates a
loophole, backdoor spending that will benefit rich people.
All of my colleagues who have had doubts about--and we have debated
in other contexts the voucher plans, and this and that and the other,
and how to approach education finance in these times. We need to have
that debate because there is no question but that we have great
challenges before us in terms of the reform of schools and providing
reform of the schools so that this generation of children will have an
opportunity at least as great as the last generation gave all of us in
this Chamber.
At the core, this debate is about what kind of educational system are
we going to have. I was a product of the Chicago public schools. I am
proud to say that, because the public schools in Chicago gave me a
quality education in a time when my parents certainly could not afford
to send us to private schools. They did, from time to time, choose the
private and the parochial schools in the area. And I went to Catholic
school myself on a couple of occasions.
But the fact is that the public schools in my neighborhood were good
public schools. So it was a legitimate set of choices. We had good
public schools, good Catholic schools, good private schools. We could
choose between good and good and good. So it was just a matter of the
nuances of the educational opportunity that our parents wanted to give
us that made the difference in their decisionmaking.
As we have gotten to this time, we are really challenged by the fact
that there is not the kind of equal choice among and between
educational opportunities for these young people. Very often--all too
often--the public schools are troubled. Everybody who has given up on
trying to fix public education, fix the public schools, says, ``OK.
Fine. To heck with them. Let's go create something else. Let's go
support something else. Let's go voucher out over here. Let's send our
kids to the Catholic schools. And let's go to the private schools,'' or
whatever.
They will come up with alternatives as opposed to confronting and
facing what do we do about providing quality public education to every
child that will allow every child the same opportunity, will allow
every child a chance to climb up the ladder of opportunity. Because,
after all, Mr. President, as I think everybody is aware, the rungs on
the ladder of opportunity in this country are crafted in the classroom.
The kind of education that a child gets not only is important to that
child as an individual, but to our community as a whole.
It just seems to me that we cannot afford to lose a single child. We
cannot afford to triage our educational system, cutting off the schools
that have to deal with the problem cases, that have to deal with the
poorest students, and letting everybody else go out and take advantage
of tax loopholes to provide themselves education in another venue
altogether.
Mr. President, the distributional effects of this tax expenditure
really are easily explainable. Again, had we had a chance to talk about
this in committee, we would have had that kind of debate. But to talk
about why this works out this way, if you think about it, low- and
moderate-income families, people that make $33,000 a year are having a
hard enough time putting food on the table for their families as
opposed to being able to just salt away and save an additional $2,500 a
year, which is at the core of this proposal.
It should be apparent--maybe it isn't--the contradiction in this
proposal. It calls itself ``an education individual retirement
account.'' The fact of the matter is, retirement accounts are supposed
to be for people in their sunset years, money put away for retirement
when they can no longer work. If you say we are going to use that
vehicle to let people use money for a lot of other things, then you
are, by definition, defeating the notion that people will be able to
save, put secure money away, and let it build up so they can retire on
it.
This says, OK, we will use the vehicle for the retirement account
model to let people save for private education. Assuming for a moment
that made sense, again, what do you do when you have a situation where
the people who need it the most get it the least? What do you do when
people who are making $33,000 a year who can't salt away $2,500 a year
for this, who can't build up the interest in the accounts? That is an
important part of this--who can't build up the interest in these
accounts. What happens to them in this situation? They wind up being
left out in the cold.
If we are thinking about the bang for the buck for tax expenditures,
this backdoor set of expenditures, it seems to me, it is the taxpayers
who are going to be called on to help make up the difference with the
loophole we have created, and they will get the least from it.
Mr. President, there is another whole set of issues in this bill
that, again, had we been able to talk about it in committee we could
have gone further in understanding the meaning of the actual language
of the legislation. The bill defines ``qualified elementary and
[[Page S11509]]
secondary education expenses'' as ``tuition, fees, tutoring, special
needs services, books, supplies, computer equipment . . . and other
equipment, transportation, and supplementary expenses required for the
enrollment or attendance of the designated beneficiary of the trust at
a public, private or religious school.''
In addition, the bill provides a ``Special rule for home schooling''
so any of the above expenses qualify if the child is home schooled.
I just read it off, and I have the words in front of me, what does
any of this mean? What does ``required transportation expenses for home
schooled child'' mean? If you are staying at home, do you still get a
transportation deduction? Does that mean a new car for mom and dad?
What does that mean? We don't have enough information to make decisions
about the $4 billion expenditure without having debate in this
committee.
Now, given the broad nature of the language of the bill, the
possibilities for abuse are almost limitless, except for one caveat:
The ability to use these provisions and reap the benefits of this broad
statute would be restricted, again, almost exclusively to the
wealthiest Americans.
Now, it is OK to say we want to give rich people tax cuts. If that is
the argument, that is fine. But it seems to me it is not altogether
appropriate to dress it up and say that we are doing this for the poor
children of America when, in fact, this is a tax subsidy for wealthy
people. And they just got a tax cut. It would be different if they had
not just gotten a tax cut.
An argument in the Finance Committee with the last bill--which I
supported, the tax bill--was that we were cutting taxes at that time in
ways that would benefit the wealthiest Americans. There are some people
in the committee that didn't have a problem with that, who said the
wealthiest Americans pay the most in taxes, they should get the most
back. If that is the argument, that is fine. But it seems to me
somebody ought to say that. The people ought to say that instead of
wrapping it up in ``education reform terms'' when, in fact, the goal of
educational reform, of saving our school system, will not be achieved.
I have other specific concerns with this legislation.
The bill attempts to limit the availability of these educational
savings accounts to single-filers with annual incomes below $95,000,
and joint-filers with annual incomes below $160,000. During the Ways
and Means markup, however, the question was asked whether a wealthy
taxpayer could avoid this limitation by making a gift to the taxpayer's
child, who would then make the contribution to the education savings
account. According to the staff of the Joint Committee on Taxation, the
bill would permit such a shell game, as long as the child earned less
than $95,000. They described the income limitations on the education
savings accounts as ``porous.''
Mr. President, in addition to benefitting only the wealthy and being
written in such as way as to be virtually unadministrable, there is yet
another problem with this bill which leads me to believe we are
considering this bill mostly for symbolic reasons. In order to meet the
revenue figures required by the offset that has been chosen, the bill
only allows contributions to be made to the new education IRA's for
elementary and secondary education for the next 5 years.
Mr. President, the purpose of IRA's is to encourage long-term
savings. The proposal before us today makes a mockery of this concept,
by allowing contributions for only a 5-year period. In so doing, it
also creates a situation where everyone who puts money into these
accounts will need to hire accountants to figure out what they are
allowed to do and how much they are allowed to various education and
education-related activities.
The bill allows contributions of up to $2,500 for the first 5 years.
These contributions, and the interest earned on these contributions,
could then be withdrawn at any time to meet certain education expenses
from kindergarten through college. After the first 5 years, however,
the bill limits contributions to $500. These contributions, and the
interest earned on these contributions, could then be withdrawn only to
meet certain higher education expenses. Over a long period of time, the
bill thus creates a situation where some amount of the interest that
has accumulated in the accounts could be withdrawn for one purpose,
while other interest that has accumulated concurrently could only be
withdrawn for another purpose. To say that these accounts would be
difficult to manage is an understatement.
Let me say this in closing, I encourage my colleagues to redirect
this retreat from quality public education in this country. There is no
question but that we have to reform the public school system. There is
no question but that the Federal Government certainly needs to do more
in terms of supporting elementary and secondary education. We are right
now paying less than 6 percent of the cost of the public schools in
this country, which is not fair. It is not fair to property taxpayers.
It is not fair to local taxpayers. In the main, education funding comes
out of the local property taxes all over this country. If you ask
anybody what is the tax they hate the most, it is their local property
taxes.
We are, for all intents and purposes, tying the ability to fund the
schools to people who have fixed incomes and who really don't have the
ability to pay more in property taxes. That is one of the reasons why
the schools are troubled, frankly, in so many areas of this country.
Those communities that have the least property taxes, that have the
least ability to expand in that regard, have the most troubled schools.
Why? Because you have tied education to fixed incomes or to declining
tax bases.
We have a General Accounting Office study, in fact, that shows that
the poorest areas in the country make the most tax effort to try to pay
for their schools. It seems to me, Mr. President, that with all these
issues to take up and with all of the challenges to reform public
education so that every child in America can access a quality
education, we ought to do that in the context of having open debate,
not trying to shut off debate on something that, again, effectively
only helps the wealthiest Americans.
I urge my colleagues to reject this retreat from public education, to
reject this retreat from education reform, to oppose this measure, and
to vote against cloture.
The PRESIDING OFFICER. The Senator from Georgia.
Mr. COVERDELL. I understand the leadership on the other side and the
NEA are endeavoring to filibuster this proposal, but they will not
succeed in the long run. This is going to happen.
I do want to respond quickly to several of the remarks of the Senator
from Illinois. First, the figures from the Treasury Department have
been ridiculed and rejected. They have absolutely no credibility. That
is the same formula they used to try to discredit the other tax relief.
They used imputed income --if you rent your house, that sort of thing.
The Joint Committee on Taxation says 75 percent of all these proceeds
will go to people making $75,000 or less.
Ms. MOSELEY-BRAUN. Will the Senator yield?
Mr. COVERDELL. I cannot yield because of the time. I know the Senator
will appreciate that.
I also want to point out that the formula that governs this account
is the same one the Senator from Illinois voted for in the tax relief
plan when the IRA saving account was set up for higher education. It is
identical. The Senator from Illinois has already voted for this
account. The distribution of the moneys is identical. In those
accounts, like these accounts, 70 percent of it will go to families
earning $75,000 or less.
The Senate and House have already expressed themselves on it. It is
means tested. It is the same formula your President and my President
requested be put in place. The same one that governs those accounts,
you and I both voted for, as did the vast majority. It is the same
formula on this account.
Now, the Senator has suggested this is something new. This is an IRA.
They have been here for 17 years. The Senate already cast 59 votes for
this account in the tax relief proposal. The House has passed it. This
is not some new idea, snaking through the Halls of Congress. We have
been dealing with IRA's for almost two decades.
The last point I make, and I understand the misunderstanding because
of
[[Page S11510]]
some of the administration views, I want to remind the Senator that 70
percent of all these new resources which would supplement education
will go to students in public schools. Public schools are going to be
the big winner here. And 10.8 million families with children in public
schools will use these accounts--so there will be an enrichment of the
public school system--of the 14 million, so that means less than 3
million will be in private schools.
Cloture Motion
Mr. COVERDELL. Mr. President, I now send a cloture motion to the desk
to H.R. 2646.
The PRESIDING OFFICER. The cloture motion having been presented under
rule XXII, the Chair directs the clerk to read the motion.
The legislative clerk read as follows:
Cloture Motion
We, the undersigned Senators, in accordance with the
provisions of rule XXII of the Standing Rules of the Senate,
do hereby move to bring to a close debate on H.R. 2646, the
Education Savings Act for Public and Private Schools:
Trent Lott, Paul Coverdell, Robert F. Bennett, Pat
Roberts, Strom Thurmond, Gordon H. Smith, Bill Frist,
Mike DeWine, Larry E. Craig, Don Nickles, Connie Mack,
Jeff Sessions, Conrad Burns, Lauch Faircloth, Thad
Cochran, and Wayne Allard.
Mr. COVERDELL. I yield the balance of my time to the distinguished
colleague from New Jersey.
Mr. TORRICELLI. I thank the Senator from Georgia, Senator Coverdell,
for yielding time to me. I am very proud to join with him in offering
this proposal today.
Mr. President, I think there is a growing awareness in our country
that the status quo in education is no longer good enough, that there
is a need for fundamental reform in the financing and the standards and
our approach to educating our children in the grade school and high
school levels.
This legislation offers the promise of a new beginning in how we
approach educational reform. In a time of limited budgets, as we seek
to balance the Federal budget, we are marshaling private resources. At
a time when families have been separated from the challenge of
educating their own children, we are challenging families to get
involved again. At a time when some are fighting between private
education and public education, we seek to help both.
Senator Coverdell and I do this in what I think is an imaginative
approach, what really is no more than an extension of what President
Clinton proposed to do and achieve with his HOPE scholarships for
colleges, we do for high schools and grade schools.
We do it in the following fashion: It is a challenge to all families
of middle-income status--$95,000 and below. From the time of the birth
of your child, you, uncles, aunts, grandparents, can put into a tax-
free account, $10, $20, $100 a month, put money aside to prepare for
the education of your child. In private school, parochial school, if
you choose a yeshiva, or in public schools--indeed, the Joint Tax
Committee has estimated 70 percent of this money will go for public
school students--by allowing families to plan, recognizing that a
public school education, is no longer a matter of 8:30 in the morning
to 3 o'clock in the afternoon with just a teacher. The whole family has
to get involved.
Use this money to buy a home computer, pay for transportation after
school so a student can get tutoring, extracurricular activities, or
hire a public school teacher after school or on weekends to get
involved in tutoring. It is the marshaling of family resources, family
involvement, to help either complement that public education or allow
for a private education.
Now, the question becomes, is it wrong to even use these private
resources to help with a private education? Unlike Senator Coverdell, I
have, through the years, opposed the use of vouchers, because I thought
it was a diversion of public resources at a time when the public
schools cannot afford the loss of resources. I had constitutional
reservations. On vouchers, we can all differ. This is not a voucher.
There is not a constitutional issue because this is private money, not
Government money. There is not an issue of compromising current
resources for public education because this is private money, and it is
new money. Not a single dollar is lost from the public schools by the
use of these IRA's. But is it needed? For those who do not want to
address the problem of private education, does it really help the 90
percent of American students who go to public schools? Absolutely.
President Clinton has put a challenge down to the country: By the year
2000, every American school should be on line. But American students do
their homework and research at home. Seventy percent of American
students do not have a computer in the home. Eighty-five percent of
black and Hispanic students do not have a computer at home. Under Mr.
Coverdell's proposal, that would be allowed from these accounts.
Mr. President, I thank the Senator for yielding the time. I am very
proud to join with him in offering the A-plus accounts.
I yield the floor.
The PRESIDING OFFICER. All time has expired.
Cloture Motion
The PRESIDING OFFICER. Under the previous order, the clerk will
report the motion to invoke cloture on H.R. 2646.
The legislative clerk read as follows:
Cloture Motion
We, the undersigned Senators, in accordance with the
provisions of rule XXII of the Standing Rules of the Senate,
do hereby move to bring to a close debate on H.R. 2646, the
Education Savings Act for Public and Private Schools.
Trent Lott, Paul Coverdell, Robert F. Bennett, Pat
Roberts, Strom Thurmond, Gordon H. Smith, Bill Frist,
Mike DeWine, Larry E. Craig, Don Nickles, Connie Mack,
Jeff Sessions, Conrad Burns, Lauch Faircloth, Thad
Cochran, and Wayne Allard.
Call of the Roll
The PRESIDING OFFICER. By unanimous consent, the quorum call has been
waived.
Vote
The PRESIDING OFFICER. The question is, Is it the sense of the Senate
that debate on H.R. 2646, the A-plus education bill, shall be brought
to a close?
The yeas and nays are required under the rule, and the clerk will
call the roll.
The legislative clerk called the roll.
Mr. FORD. I announce that the Senator from Montana [Mr. Baucus], the
Senator from West Virginia [Mr. Rockefeller], and the Senator from
Minnesota [Mr. Wellstone] are necessarily absent.
I further announce that, if present and voting, the Senator from
Minnesota [Mr. Wellstone] would vote ``no.''
The PRESIDING OFFICER. Are there any other Senators in the Chamber
desiring to vote?
The yeas and nays resulted--yeas 56, nays 41, as follows:
[Rollcall Vote No. 288 Leg.]
YEAS--56
Abraham
Allard
Ashcroft
Bennett
Bond
Brownback
Burns
Campbell
Coats
Cochran
Collins
Coverdell
Craig
D'Amato
DeWine
Domenici
Enzi
Faircloth
Frist
Gorton
Gramm
Grams
Grassley
Gregg
Hagel
Hatch
Helms
Hutchinson
Hutchison
Inhofe
Jeffords
Kempthorne
Kyl
Lieberman
Lott
Lugar
Mack
McCain
McConnell
Murkowski
Nickles
Roberts
Roth
Santorum
Sessions
Shelby
Smith (NH)
Smith (OR)
Snowe
Specter
Stevens
Thomas
Thompson
Thurmond
Torricelli
Warner
NAYS--41
Akaka
Biden
Bingaman
Boxer
Breaux
Bryan
Bumpers
Byrd
Chafee
Cleland
Conrad
Daschle
Dodd
Dorgan
Durbin
Feingold
Feinstein
Ford
Glenn
Graham
Harkin
Hollings
Inouye
Johnson
Kennedy
Kerrey
Kerry
Kohl
Landrieu
Lautenberg
Leahy
Levin
Mikulski
Moseley-Braun
Moynihan
Murray
Reed
Reid
Robb
Sarbanes
Wyden
NOT VOTING--3
Baucus
Rockefeller
Wellstone
The PRESIDING OFFICER. On this vote, the yeas are 56, the nays are
41. Three-fifths of the Senators duly chosen and sworn not having voted
in the affirmative, the motion is rejected.
Mr. MOYNIHAN. Mr. President, I move to reconsider the vote by which
the motion was rejected.
Mr. LOTT. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
[[Page S11511]]
Mr. LOTT. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. LOTT. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. LOTT. Mr. President, I ask unanimous consent that I be able to
proceed for 5 minutes notwithstanding rule XXII.
The PRESIDING OFFICER. Without objection, it is so ordered.
____________________