[Congressional Record (Bound Edition), Volume 159 (2013), Part 11]
[Extensions of Remarks]
[Pages 16566-16567]
[From the U.S. Government Publishing Office, www.gpo.gov]




 INTRODUCTION OF THE BIPARTISAN STUDENT AND FAMILY TAX SIMPLIFICATION 
                                  ACT

                                 ______
                                 

                          HON. DANNY K. DAVIS

                              of illinois

                    in the house of representatives

                      Wednesday, October 30, 2013

  Mr. DANNY K. DAVIS of Illinois. Mr. Speaker, education is key to the 
economic well-being of our citizens and our democracy. Today, I am 
pleased to join my colleague, Diane Black from Tennessee, in 
introducing the Student and Family Tax Simplification Act. This 
bipartisan bill simplifies our tax code and dramatically strengthens 
our investment in students and their families, expanding aid for the 
lowest-income students.
  Tax-based aid represents more than half of all non-loan federal aid, 
playing an important role in promoting college affordability, access, 
and completion. As partners in the Ways and Means Education and Family 
Benefits Tax Working Group, Congressman Black and I heard from dozens 
of experts about the need to improve education tax benefits. There was 
surprising agreement among politically-diverse stakeholders about the 
problems of and promising reforms to tax-based education benefits. The 
Student and Family Tax Simplification Act is a bipartisan effort to 
implement stakeholder recommendations for reform.
  Education tax experts described current education tax benefits as 
complex and poorly targeted. The greatest agreement centered on 
creating one credit for current education costs to improve the 
simplicity, awareness, and use of tax benefits. Stakeholders 
highlighted that the complexity of multiple benefits makes it difficult 
for taxpayers to understand whether they qualify for a benefit and 
which benefit best meets their needs. Indeed, a study by the Government 
Accountability Office showed that 1.5 million tax filers who qualified 
for either the Tuition and Fees Deduction or the Lifetime Learning 
Credit in 2009 did not claim the credit or deduction; another 237,000 
did not claim optimal benefits. To improve the effectiveness of the 
American Opportunity Tax Credit (AOTC), both conservative and 
progressive stakeholders urged policymakers to target benefits to low- 
and moderate-income taxpayers whose college enrollment and persistence 
decisions are more sensitive to cost.
  The Student and Family Tax Simplification Act simplifies education 
benefits by consolidating the Hope Tax Credit, the Tuition and Fees 
Deduction, and the Lifetime Learning Credit into the AOTC, creating a 
single credit for current educational expenses. The bill also extends 
the AOTC permanently rather than allowing it to expire in 2017 and 
preserves the value of the credit over time by adjusting for inflation 
starting in 2018, an important provision given that college expenses 
have risen much quicker than inflation for many years.
  In addition, the bill creates an improved, more robust education tax 
benefit for low-income students in multiple ways. It adopts the upper 
phase-out limits for the Hope tax credit adjusted for inflation, which 
focuses aid on families whose incomes are in the bottom 80% of income 
distribution. The bill also doubles the current phase-out range for 
single and joint filers to create a more gradual phase-out of the 
benefit and to reduce the effective marginal tax rate associated with 
the phase-out. These changes phase-out the credit for single tax filers 
between $43,000 to $63,000 ($86,000 to $126,000 for joint tax filers).
  The bill expands aid to low-income students by increasing the amount 
of credit available and removing obstacles to claiming the credit. This 
bill increases the maximum refundable credit from $1,000 to $1,500. It 
also changes the process of awarding the credit from covering a 
proportion of total eligible expenses to covering the first qualified 
expenses. Currently, a family would have to have $4,000 in expenses to 
claim the $1,000 refundable credit; under the new bill, low-income 
families could claim the full $1,500 refundable credit after only 
$1,500 in eligible expenses, greatly enhancing the effectiveness of the 
credit for low-income families.

[[Page 16567]]

  The bill also allows students to combine Pell grants and AOTC to 
address unmet financial need. Due to poor coordination between Pell 
grants and the tax code, an estimated 1 million college students with 
unmet financial need do not receive any benefit from the AOTC, with the 
vast majority of these students attending low-cost institutions such as 
community colleges. The bill improves coordination between the AOTC and 
Pell without double counting the same expenses as well as excludes Pell 
grants from taxation to simplify compliance.
  In closing, the Student and Family Tax Simplification Act will help 
streamline education tax benefits, making it easier for students and 
families to understand and take advantage of education tax benefits. 
Further, it will substantially increase federal assistance for 
education for the lowest-income students and families, improving the 
affordability of higher education.

                          ____________________