Senate approves $2,000 tax-exempt education accounts

On March 2, by a vote of 61 to 37, the Senate passed the Affordable Education Act, which would allow families to deposit up to $2,000 annually-rather than the $500 in an earlier version-into a tax-free Education Savings Account (ESA) for each of their children and use the money for expenses connected with elementary, secondary and higher education in private or public schools. Married couples with a combined annual income of $190,000 would be eligible to make full contributions to the ESAs, with eligibility phasing out at a combined income of $220,000. The bill, sponsored by Sen. Paul Coverdell (R.-Ga.), would extend tax exemption to employer-provided educational assistance programs and state-run prepaid tuition programs, and make deductible up to $2,500 of interest on educational loans.

Most of the provisions of this bill were Included in 1997,1998 and 1999 legislation passed by the Senate, but were either eliminated in later versions, or vetoed by the President along with the rest of the bill. Clinton has said he will also veto this bill If it is passed by the House, which seems likely.

Republicans offered this measure as an alternative to many of the education spending programs requested in the President's 2001 budget. The budget called for $4.5 billion in spending, while Coverdell's bill would provide $225 million in tax cuts.

"Every segment of education in America will be a winner--public education, private education, home schooling, you name it," said Coverdell of his plan. "These accounts will all infuse new resources for which the federal government will not have to appropriate a dime to get the job done: Fourteen million families, 20 million children, a resource that is available to them from kindergarten through college, and thereafter If disabled. Public education wins..Private, home schooling, and every form of education wins. To me, it is mind-boggling that anybody would challenge the concept."

Nonetheless, Sen. Ted Kennedy (D.-Mass.) --attacked the bill, arguing it would not provide any solutions to the problems facing American education. "What can we do in the Senate to help local communities have greater safety and discipline in the schools? That is what parents are concerned about. That is what we want to debate. It Is on that which we want to call the roll. But no, we vAli debate whether there will be tax provisions that benefit some, to the tune of $225 million, an average of $7 per family."

Sen. Judd Gregg (R.-N.H.) responded, "Nobody is claiming this is the entire rug or the entire makeup of the issue of how we address education. No one is claiming that this is the whole quilt. This is one block within the quilt, one item of the quilt in how we improve education in this country today."

Gregg criticized the Democratic solution of pouring more money into federal education programs. "Even though we have spent $100 billion on education, unfortunately, the children with whom we started out 20 years ago in this program have ended up coming through a system which has failed them. We are still sticking kids into that system. We are still running them through that system, the same way it has always been--counting bureaucrats instead of counting results; not focusing on the child but rather, focusing on systems. That is a failure."

Coverdell rejected Kennedy's comparison between the President's spending and his tax cuts. "in my judgment, the $12 billion is worth three to five times the money the senator from Massachusetts is talking about. Why? Public education money, we all know, is spread across a wide arena. A lot of it never sees a classroom. It doesn't know the name of a single student. It cannot get targeted to particular problems."

Many Democrats opposed the provision that allowed for ESA funds to be used for private elementary, junior high, and high schools, because, they said, it would take too much power out the government's hands and help only the rich. Liberal Republican Sen. Lincoln Chafee (R.-R.I.) agreed with this sentiment, exhibiting the all-too-common confusion between government spending and tax breaks.

I do not believe that the federal government should divert funds, in this case more than $2 billion, to private and parochial education. Such a move would be a fundamental change in the federal role in education, a change I believe is misguided. Ninety per cent of American children attend public schools."

Sen. William Roth (R.-Del.), chairman of the Finance Committee, pointed out that helping parents of private schoolers was not just helping the rich. "Almost 701/6 of the families with children in Catholic schools have incomes below $35,000, and almost 90% of those families have incomes below $50,000."

Sen. Jeff Sessions (R.-Ala.) stressed the importance of finding education solutions without increasing federal interference. "Historically, education has always been a state and local enterprise. We have local school boards. We have local superintendents. We have principals who participate in the civic clubs of our community, who know our parents, teachers who know our parents, and PTA associations. Education is local."