Tax-Credit Proposal May Face Changes To Benefit the Poor
Washington--The Senate Finance Committee, after two unsuccessful attempts last week to reach agreement on provisions of the tuition tax-credit bill promoted by the Reagan Administration, deferred further work on the bill until later this month.
Although the Administration had urged swift action by the committee in order to bring the measure to the Senate floor for a vote in the current session of Congress, Robert Dole, the Kansas Republican who chairs the committee, said last week that he would delay action until Administration officials could clarify a controversial provision in the bill prohibiting a tax credit for tuition to racially discriminatory private schools. Senator Dole also outlined changes in other aspects of the measure that he said had been suggested by committee members who sought to focus the tax benefits on low-income families.
The Administration's bill, which would provide a credit for private-school tuition of up to $500 per child by the fiscal year 1985, contains three safeguards aimed at preventing discriminatory private schools from benefiting from the tax credits: Only parents who send their children to schools that are granted tax-exempt status by the Internal Revenue Service (irs) are eligible for the credits.
Private schools must file a statement of nondiscrimination each year with the federal government.
And parents who believe their children have been denied admission to a school because of racial discrimination can complain to the Justice Department, which can investigate the complaint and bring suit to revoke the school's tax-exempt status.
Nevertheless, three members of the Finance Committee--Democrats Daniel P. Moynihan of New York and William Bradley of New Jersey, and Republican Robert Packwood of Oregon--questioned whether the provisions would be sufficient to guard against the granting of credit for tuition to schools that discriminate on the basis of race.
Senator Packwood said he wanted assurances from the Administration that the anti-discrimination provisions would be "iron clad and wiggle-proof. I cannot emphasize how critical it is to this Administration to have no odor of discrimination in this bill."
Finance Committee staff members said after last week's meetings that the Senators did not object to the wording of the anti-discrimination provisions contained in the Administration's bill. "They are mostly concerned with whether this Administration will enforce the provisions," said an aide to Senator Dole.
The staff members said the Senators' greatest concern is whether the irs would be permitted by the Administration to investigate the admissions policies of schools, prior to granting tax-exempt status.
Although irs regulations mandate such investigations, the Reagan Administration attempted to revoke that power last January. At the time, the Administration contended that the power to investigate the policies of schools had not been specifically granted to the irs by the Congress.
The issue is currently before the Supreme Court, in a case brought by Bob Jones University in Greenville, S.C., and the Goldsboro Christian Schools in Mississippi--two institutions that have been denied tax-exempt status.
In challenging Administration officials to provide "air tight" assurances that the tuition tax-credit pro-posal contained adequate safeguards against such discrimination, Senator Dole said that "if in fact there is even a hint that we're moving backward in this area, we're not going to report this bill. If we don't resolve these questions, there may not be a further mark-up," he said.
Other provisions of the bill that committee members suggested should be modified included:
Reducing the maximum allowable tax credit from $500 per child to $300 per child.
Permitting only parents with annual incomes below $40,000 to qualify for the full credit, and only parents earning less than $60,000 to qualify for a partial credit. The Administration's comparable figures are $50,000 and $75,000, respectively.
Adding a "refundability" provision that would permit families whose incomes are so low that they owe no federal income tax to receive the tax credit in the form of a rebate.
Senator Dole said that, taken together, the three provisions suggested by the committee would reduce the annual cost of the bill from $1.25 billion to $900 million.