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House Backs Education Tax Break for Grades K-12

By John E. Yang
Washington Post Staff Writer
Friday, October 24, 1997; Page A11

Voting largely along party lines, the House approved legislation yesterday that would allow parents to set up tax-favored savings accounts to pay for education-related costs for children in kindergarten through 12th grade.

The measure, passed on a 230 to 198 roll call vote, is part of Republican efforts to make education issues – especially the question of allowing parents to choose their children's schools – a major part of the party's campaign to retain control of Congress in the 1998 elections.

The White House said yesterday that President Clinton's advisers would urge him to veto the measure if it reached his desk "because it is bad education policy and bad tax policy." The provision was dropped from the balanced-budget plan this summer after Clinton threatened to veto the entire package because of it.

Sen. Paul Coverdell (R-Ga.), the measure's prime sponsor, said he expects the Senate to consider the bill before quitting for the year and believes the measure has enough support to prevail.

The bill would allow taxpayers with adjusted gross incomes of less than $110,000 a year, or $160,000 for couples, to establish accounts to pay education-related expenses for children in primary and secondary education, including tuition, fees, tutoring, books, supplies, transportation and computer equipment and software.

Taxpayers could contribute up to $2,500 a year per student through 2002; after that the limit would drop to $500 a year. The interest earned on the account would be tax-free.

Similar accounts for higher education costs were established by tax legislation enacted this summer as part of the balanced-budget agreement.

Supporters argued that the accounts are needed to give parents the financial help to choose either educational aid or different schools for their children. By giving low- and middle-income families greater access to private schools, the competition will pressure public schools to improve, they said.

"The worst case in the worst neighborhood of the poorest families, they should have the same right to choose as the rich who go to private schools," said House Speaker Newt Gingrich (R-Ga.).

Opponents said the accounts would provide the greatest benefit to higher-income families who would save money even without the tax incentives.

"You don't help public schools by siphoning off money for elite, private schools," said Rep. Lloyd Doggett (D-Tex.).

Reps. Herbert H. Bateman (Va.) and Constance A. Morella (Md.) were among eight Republicans to vote against the measure and Virginia Reps. Virgil H. Goode Jr. and James P. Moran Jr. were among 15 Democrats to support it.

The congressional Joint Committee on Taxation estimated the tax break on the savings accounts would cost the Treasury $2.6 billion in reduced revenues through 2002. To offset that revenue loss, the measure would also overrule a tax court ruling on how deferred vacation pay is treated in employers' taxes.

© Copyright 1997 The Washington Post Company

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