Roth Offers Substitute Amendment to the Affordable Education Act
WASHINGTON -- Senate Finance Committee Chairman William V. Roth, Jr. (R-DE) today urged changes to S. 1134, the Affordable Education Act. Roth delivered the following statement:
"Mr. President, I rise to offer a substitute amendment to S. 1134, the Affordable Education Act. The underlying bill was reported out of the Finance Committee almost one year ago, in May 1999. My substitute amendment makes some important and necessary policy changes that were not done before -- because of budget constraints one year ago. My amendment also updates the bill to account for the passage of time.
"When the Committee originally considered this education bill, we were operating under last year's budget scenario. Since that time, the surplus numbers have increased dramatically. In today's economic environment, I believe that it is appropriate to use the surplus to provide education tax incentives for American families. Through their hard work, the American people created these favorable economic conditions and the resulting budget surplus. They should be entitled to take some of that surplus back.
"We should not have to raise taxes to offset these much needed education tax incentives. My amendment makes this legislation a true tax cut relief bill for education. With a growing federal surplus created by their tax dollars, Americans should not be taxed again to pay for a national priority.
"Accordingly, my substitute amendment strikes all of the revenue raisers in S.1134. The cost of my amendment -- less than $10 billion over 10 years -- is but a small percentage of the projected on budget surplus over the next ten years.
"Now let me explain some of the substantive changes that I make in the substitute amendment. First, the underlying bill increases the maximum contribution amount for an Education IRA from $500 per year to $2,000 per year. The underlying bill also allows contributions to an education IRA to be used for kindergarten through high school education expenses. These are both important and needed changes. But the underlying bill sunsets both of those benefits after the year 2003. That is not good policy. Accordingly, my bill removes the sunset - it makes permanent both the increase in the contribution limit and the flexibility in the use of the accounts.
"Planning and saving for college should take place as early as possible. To help families make those important decisions, they need to know how much money they can put away and what it can be used for. Having provisions that sunset - and thus need to be renewed by Congress - take away from that certainty. We need to make saving for college easier and more certain -- not complex and uncertain.
"I can easily see why a family would not want to take their hard earned savings and put them in a program where the terms could change in a few years. My amendment helps to solve that problem. We should not sunset our future - the education of our children.
"Education IRAs are extremely important for a few reasons. First, they help families afford the escalating costs of higher education. The increase to $2,000 will make these accounts more attractive to families who want to use them and to institutions who want to offer them. Second, the existence of an education IRA gives an additional push to a student to attend college. Last month, the Senate Government Affairs Committee held a hearing on the rising cost of college tuition. One of the witnesses was Dr. Caroline M. Hoxby, an Associate Professor of Economics at Harvard University.
"Commenting on the behavioral incentives of an education IRA, Dr. Hoxby noted that for an eighth grader, there is something different about knowing that there is money being put away for your college education and that you will lose it and the opportunity to go to college if you do not continue to do well. It makes sense that a child who is aware that there is a fund being built up for his or her future education would think longer and harder about going to college.
"My amendment also fixes a trap for the unwary. Under current law, a student who takes a distribution from an Education IRA is not able to use the HOPE or Lifetime Learning Credit -- even if different education expenses are allocated for the different tax benefits. This is not right. We are providing these education tax incentives to families because they need them. We should not hold them out there -- making people believe that they are available -- and then take them away. Because of revenue constraints, the original Finance Committee bill fixed this coordination only for a few years. My amendment makes the coordination permanent, and makes sure that families continue to receive the full benefits from all these tax benefits.
"My amendment also makes the tax-free treatment of employer-provided educational assistance permanent. In last year's extenders bill, Congress extended the current tax-free treatment for a few years. That was the right move, but it did not go far enough. First, something as important and necessary as continuing education should not be wrapped up in the uncertainty of extenders legislation. Workers and companies need to plan ahead, and they need to know how these educational expenses will be treated under the tax code. Second, we should re-institute the exclusion for graduate education expenses. Especially in today's dynamic economy -- which is marked by high technology and innovation -- it is important that workers have access to graduate education. My amendment recognizes that fact, and so it makes permanent tax-free treatment of employer-provided educational assistance for both undergraduate and graduate level courses.
"Finally, Mr. President, my amendment updates the Finance Committee bill by changing the effective dates of the provisions. They would all be effective beginning in the year 2001. I should also note that my amendment takes into account the Senate's adoption of the Collins amendment yesterday -- and so includes that amendment in the substitute.
"Why are the permanent provisions in my amendment so important? Well, some Senators have tried to rationalize their opposition to this bill by claiming that it would not do enough to advance education.
"My amendment guarantees that this is simply not true.
"My amendment would allow parents to contribute up to $2,000 annually toward their child's education -- from the day of birth to the first day of college.
"That's just $5.48 a day or $38.46 a week. That may not seem like a lot but, like a train, it may start slowly but it is very powerful. It will gain speed. It is a savings express to college.
"By putting their child on the savings express, after 18 years when that child is ready to go to college, the parents will have $65,200.
"And that just assumes a 6 percent rate of interest -- the rate on a government security. Of course, other investments could yield even more, but a U.S. government security is the safest in the world.
"So parents would have at least $65,200 toward their child's education. $29,000 of that would be solely due to the power of compounding interest. And every cent of that $29,000 would be tax-free - it would go straight into education.
"Maybe that still doesn't seem like a lot to some folks, but it sure seems like a lot to parents who are struggling today to insure college for their children tomorrow.
"The average annual cost of college (tuition, room, and fees) in 1997-1998, was $9,536. At the University of Delaware, it is $9,984 for this school year.
So the national average total cost is roughly $10,000 per year or $40,000 for the cost of a college education.
"My amendment before us today will cover this. It will give parents and students peace of mind.
"My amendment is a powerful incentive to save. It is an engine. It is the engine that can pull a long train of savings -- and dreams.
"Like the Little Engine that Could, my amendment makes this legislation the Education Savings Plan that Will. Parents and children getting on this savings train, will get off at college to a better future.
"I am amazed that some people are trying to overlook the train and just see the caboose. I promise you that the American people are not. America has waited for this college savings plan for three years. This legislation brings it home today. It is time that the President got on-board.
"The measures in this bill are an important step forward. My amendment to it will not only take us a another step forward but keep us on a permanent track to prosperity. I urge my colleagues to join together in a bipartisan effort to make education affordable for America's families."
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