How Clinton Tuition Tax Cut May Affect Family Pocketbook
PRESIDENT Clinton's proposal to allow a tax deduction for college-tuition payments has struck a positive bipartisan chord with politicians and education professionals - as well as families with college-bound children who face platinum-priced tuition fees.
``He would be helping middle-class families in a way we have not seen before,'' says Michael Maxey, a vice president at Roanoke College in Salem, Va.
The president's plan would allow a family earning less than $120,000 a year to deduct annually up to $10,000 of tuition costs for a variety of post-secondary schools: two- and four-year colleges, vocational schools, graduate schools, and worker retraining. For a family in the top tax bracket taking the full deduction, that would mean a savings of $3,000 a year.
But some economists are raising questions about the real impact of the plan and whether it's the most effective way to target the people who need the most help. For example, someone who does not earn enough to pay taxes would not be helped at all.
``This could be an open invitation to the universities to raise their tuitions,'' effectively wiping out the savings of the tax break, says William Dickens, an economist at the Brookings Institution here in Washington. ``It would be a big matching grant on the part of the federal government, so I wouldn't be surprised if this happened.''
Though tuitions have soared in the last 15 years, colleges and universities say they are still hard-pressed to cover their costs. They must pay top dollar to attract talented teachers. Some face severe maintenance needs. Advances in technology require constant updating. At state universities, competition for public dollars grows increasingly fierce.
Mr. Maxey of Roanoke College, a private institution, acknowledges that larger-than-usual tuition hikes could result, but he doubts that would happen. ``Not in the current environment. We've been going up too fast for too long and there would be a tremendous public outcry,'' he says.
Tuition, room, and board at Roanoke is now $17,850. The most expensive private institutions in the country run at well over $20,000 a year. Average tuitions at state universities and community colleges have risen from $1,300 in 1982 to $2,000 last year, after factoring out inflation.
Mr. Dickens, the Brookings economist, also questions whether Mr. Clinton's proposal is the smartest way to target the neediest people - those for whom federal help might make the difference between seeking higher education and going into a low-paying, dead-end job. Other economists have suggested that the plan would likely not bring many new students into schools, but rather would result in a windfall for people who would go to school anyway. Dickens suggests more could be accomplished with a subsidy directed at less-advantaged people.
FEW people disagree that education is the key to increasing earning potential. In his Saturday radio address, Clinton linked the growing cost of higher education and the threat to the middle class. ``Too many people are being priced out of a shot at high-quality education,'' Clinton said. ``If we can't change that, we are at risk of losing our great American middle class and becoming a two-tiered society with a few successful people at the top and everyone else struggling below.''
How the government would pay for this tax break will continue to be debated. Some Republicans have proposed, as part of their plan to pay for the spending shifts and tax cuts in the ``Contract With America,'' that the government stop paying for the interest on federally guaranteed student loans, and require students to add those deferred-interest payments to their monthly payments upon graduation.
Speaking to reporters last Friday, Treasury Secretary Lloyd Bentsen pointed out the growing financial burden of higher education on families. In 1980, he said, a typical family paid 11 percent of their income to send a student to public college. Private college was 26 percent. In 1992, families were spending 15 percent of income to send a student to public college, and 40 percent to private college.
``They just can't hump that, middle-income folks, and that's what we're providing for,'' said Secretary Bentsen.