Clinton Offers Tax Credit Linked to College Tuition

Appearing at one of the nation’s most expensive private universities, President Clinton on Tuesday proposed a new tax credit intended to make college more affordable for all high school graduates.

In a commencement address at Princeton University, Clinton said the new tax credit was intended to expand the “standard of education” for Americans from the current 12 years of primary and secondary education to at least two years of college education.

With earnings increasingly tied to education, Clinton said, “our goal must be nothing less than to make the 13th and 14th year of education as universal as the first 12 are today.”

To reach that goal, Clinton proposed a tax credit for tuition costs of up to $1,500 annually during the first two years of college. Such a subsidy, Clinton argued, would allow all Americans to afford at least a community college education.

Clinton’s call for a new tuition tax credit raised the bidding in the election-year tax-cutting competition between Clinton and Kansas Sen. Bob Dole, the presumptive GOP nominee who has been considering a variety of tax reduction plans.

Dole campaign officials refused to even recognize Clinton’s proposal as a tax cut, denouncing it as a “tax increase.” That’s because Clinton said he would pay for it partly by raising fees on passengers leaving the U.S. on international flights to $16 from $6, and reducing a tax credit for U.S. companies with international sales. The White House said it would cover the plan’s remaining cost by auctioning off part of the radio spectrum now used for subscription-based wireless services.

“There he goes again,” Dole said, parroting a line GOP presidential candidate Ronald Reagan used against then-President Carter in a 1980 debate. “Who knows what taxes he’ll increase if he should be reelected.”

The proposed tax credit would cover only a small share of the tuition at elite private schools such as Princeton, which charges $21,000 annually.

But White House officials said the credit--which provides a dollar for dollar reduction in federal taxes--would offset the full cost of tuition for two-thirds of the nation’s community college students; the average tuition at California community colleges is $363 annually, according to Department of Education figures.

Under the proposal, high school graduates would be eligible for the credit during their first year in college; to retain eligibility for the second year, students would have to earn at least a B average and avoid drug-related convictions.

Just under half the work force now has only a high school degree or less; the rest divides equally between those with at least a four-year college degree, and those with some college but not a four-year degree, according to the Bureau of Labor Statistics. In the last 20 years, the gap between the earnings of college-educated workers and those without advanced education has sharply widened.

“More than ever before in the history of the United States, education is the fault line, the great Continental Divide between those who will prosper and those who will not in the new economy,” Clinton said. “Now, we have to work to give every American that kind of opportunity.”

With Congress unlikely to act on the tax credit idea this year, the proposal was noteworthy mostly for illuminating Clinton’s continuing efforts to define a politically defensible role for Washington in what he christened Tuesday as “a new progressive era.”

While Dole and the Republican Congress have argued that the key to economic and social renewal is retrenching the role of government, Clinton continues to argue for government intervention, particularly in increasing access to education and training.

Clinton’s call for this new tax credit builds on and overlaps his earlier proposal for a $10,000 tuition deduction. The deduction would allow families to reduce their taxable income by up to $10,000 in tuition costs for any form of college or postgraduate education; the credit would reduce a family’s actual tax bill by up to $1,500 annually for the first two years of college expenses.

The credit would be “refundable,” which means that if a family’s tax burden was less than the value of the credit, it would receive the balance as a refund from the government.

Clinton aides said families could employ either the tax deduction or the credit, but not both. The administration said the credit and deduction would cost $43 billion annually.