Clinton Seeks Support for Education Tax Breaks

President Clinton urged prominent educators Thursday to support his proposal for broad new tax breaks designed to help parents put their children through college or enroll them in training programs.

Clinton summoned a group of college and university presidents to the White House to outline his plan--part of his “middle-class bill of rights”--to let families claim a tax deduction for college tuition and make early withdrawals from individual retirement accounts to finance higher education.

The tax breaks, which could reduce government revenues by $21 billion over five years, are needed to encourage people to obtain the advanced training necessary to offset the steady erosion of wages for unskilled or semiskilled work, the President maintains.

Yet even as the President attempted to drum up support for his higher-education initiative, some private economists expressed doubt that the proposals really would save Americans much money.

Although the tuition credit could reduce a family’s annual tax bill by as much as $2,800, analysts said the savings could be offset if colleges see it as an opportunity to raise tuition charges.

“There’s a very real risk that institutions will say: ‘Now we can raise our tuition because people have more money,’ ” said Steve Moore, an economist at the conservative Cato Institute.

Moderate economists, like Gary Burtless of the Brookings Institution, agreed that tuition increases would be likely. “But I don’t think they’re going to go up fully to reflect the total amount of the tax deductions,” he added.

Clinton Administration officials acknowledged that they had explored the question of whether the tax breaks would be diluted by tuition hikes and concluded that some increases would be possible, but only minor ones. “Everything enters into the decision” when institutions are setting tuition rates, said Mike Smith, an assistant secretary of education.

While praising the Clinton plan as an important initiative for increasing access to higher education, the college and university presidents who met with Clinton stressed that their institutions would not raise tuitions as a result. They expect tuitions to rise, they said, but not at the astronomical rates of the last 15 years and not because of the proposed tax deduction.

“We can assure you as a community (that) higher education really does care about accessibility and affordability,” said Gordon A. Haaland, president of Gettysburg College. “We have taken great efforts to reduce the rate of increase of tuitions.”

From 1980 to 1993, the average annual tuition for a four-year public college soared from $662 to $2,190 and from $3,811 to $13,043 for the average private four-year college. The increases in tuitions and fees, however, have moderated to 6% per year in the last few years.

While most low-income Americans are able to arrange for financial aid, many middle-class Americans have had no choice but to go deep into debt to finance college educations.

Under Clinton’s proposal, a family of four earning $50,000 a year and struggling to pay $10,000 in tuition, for instance, would be able to deduct a maximum of $10,000 and could see their federal taxes cut 31%, from $4,875 to $3,375.

Couples earning as much as $120,000 and single filers earning as much as $90,000 would be eligible to deduct tuition, but the deductible amount would decrease for families earning more than $100,000 and single filers earning more than $70,000.