President's tax cut fails to win support

January 6, 1995

United States president Bill Clinton's plan for a middle-class tax cut -- allowing families to offset up to $10,000 of college tuition against tax -- is under fire from the higher education world.

The president had made much of how this tax deduction, the centrepiece of his tax-cutting plans, would help to train and educate millions of Americans who could not otherwise afford it. He went on televison to promote it, followed by a radio address, accompanied by education secretary Richard Riley.

With college costs spiralling, "too many people are being priced out of a fair shot at high-quality education," he said.

President Clinton's plan is that families earning up to $100,000 a year should be able to deduct up to $10,000 for college tuition or other post-school education.

A family earning $100,000 might be considered by many to be verging on wealthy.

But under the President's plan they would benefit more than poorer people. By offsetting $10,000 against tax, they would be able to reduce their tax bill by more than $3,000.

Poorer people earning, for example $40,000 a year, would be able to reduce their tax bill by only $450.

According to Sany Baum, professor of economics at Skidmore College, Clinton's proposal is "seriously flawed" because it offers a higher subsidy to people in higher tax brackets. "The president is not proposing to help the people who need the help the most," he said. "He's helping those whose political support he thinks he needs."

College tuition is not increasing at the rate it has in the past, but it is still -- at 6 per cent a year -- running ahead of inflation. One university president, Vartan Gregorian, of Brown, has devised his own solution to the problem -- a National Students Savings Bank. Children would open accounts in the bank at the age of two or four, and parents and grandparents could contribute over the years, he argues. Interest would accumulate tax-free.

President Clinton's plan is also criticised for the effect it could have on increasing tuition further. Robert Zemsky, director of the Institute for Research on Higher Education at the University of Pennsylvania, thinks state legislatures would be tempted to increase tuition by as much as the tax break.

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