Tax Reform, Budget To Dominate Congress's Agenda

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Fresh from their summer recess, lawmakers last week began considering proposals to modify President Reagan's plan to eliminate the deduction for state and local taxes as part of an overhaul of the federal tax code.

That piece of the President's tax plan will be one of the major issues on Capitol Hill this fall for education lobbyists, who say they fear that ending deductibility would hamper efforts to raise state and local taxes to finance school reform.

On other major education-related issues--besides appropriations--the 99th Congress is not expected to take much action before the end of its first session, Congressional aides and lobbyists said last week.

Tax Reform

Congressional testimony last week by officials of the National Education Association and the National School Boards Association underscored educators' concerns about eliminating federal income-tax deductions for state and local taxes.

"We're not frightened, we're hysterical," Nellie C. Weil, first vice president of the NSBA, told the Joint Economic Committee. The repeal of deductibility would be "a tax on local revenue-raising ability."

At the same session, Mary Hatwood Futrell, president of the NEA, said the repeal would most directly affect teachers, because there would be less money available to raise salaries, and "teachers are the key to reform of the schools."

Eliminating the tax deductions would raise about $34 billion by fiscal 1988, according to Administration estimates. The government's need for revenue to cover projected losses from other elements of the tax plan could frustrate efforts of those who favor retaining the deductibility provision in the federal tax code, Congressional aides said.

Compromise Discussed

According to aides on the House Ways and Means Committee, which may begin writing its tax-reform bill this month, members of Congress will be hard-pressed to pass a bill without eliminating some or all of the deduction for state and local taxes.

President Reagan in May announced his proposals to overhaul the tax code, which he has criticized as unfair and too complex, and last week he began a political offensive on behalf of tax reform.

Neither the Administration nor the Ways and Means chairman, Representative Dan Rostenkowski, Democrat of Illinois, has ruled out compromise on deductibility.

"We're not saying we wouldn't," said Arthur Siddon, senior public-information officer for the Treasury Department. "We don't know. It'll be up to what Congress does, and then it will be up to Treasury."

Options Studied

"We certainly have discussed [compromise on deductibility]," said John Sherman, spokesman for Representative Rostenkowski. "It's possible to compromise on every issue, and like every other issue, it's open." He confirmed that committee staff members are meeting with Administration and Congressional aides to study various alternatives.

But another committee aide, noting that "there are possible compromises," said he did not think lawmakers "can lop off too much and still have the reform that people are talking about."

The aide said some of the options include: allowing a fractional deduction, allowing deductions up to some ceiling, or setting a floor on the deduction.

Gregory A. Humphrey, legislative director for the American Federation of Teachers, said the union is "totally opposed to compromise" and is seeking to keep the deductibility provision in the tax code.

In another tax-reform development, Administration officials said last week they had agreed to keep the current tax credit for child-care expenses. The President had proposed eliminating the credit in favor of a dependent-care deduction.

On other education-related legislation:

  • Senate hearings begin this week on the federal higher-education laws, which expire next year, and a House subcommittee will soon begin to draft its version of the new bill. Secretary of Education William J. Bennett is expected to release his proposals for revising the laws next month.
  • The House appropriations subcommittee for the Education Department met last week in secret session to draft a fiscal 1986 spending bill.
  • This week, the House Education and Labor Committee is scheduled to vote on a measure providing for attorneys' fees in special-education lawsuits. The Senate has approved a version of the bill.
  • The House is likely to consider in the coming weeks the reauthorization of child-nutrition programs.
  • Mr. Bennett is expected to send to the Congress a proposed compensatory-education voucher bill, which the Office of Management and Budget has reportedly cleared. The Justice Department is now said to be reviewing it.
  • The civil-rights bill designed to nullify a 1984 Supreme Court decision narrowing the scope of federal anti-discrimination statutes has been stalled the past few months because of language dealing with abortion that was added by a House committee.

Vol. 05, Issue 02, Page 12

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