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Ronald Reagan Presidential Library
Digital Library Collections
This is a PDF of a folder from our textual collections.
Collection: Blackwell, Morton: Files
Folder Title: Tuition Tax Credits I (9 of 13)
Box: 26
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II
97TH CONGRESS
2D SESSION
S.2673
To amend the Internal Revenue Code of 1954 to provide a Federal income tax
credit for tuition.
IN THE SENATE OF THE UNITED STATES
JUNE 23 (legislative day, JUNE 8), 1982
Mr. DOLE (for himself, Mr. ROTH, and Mr. D'AMATO) introduced the following
bill; which was read twice and referred to the Committee on Finance
A BILL
To amend the Internal Revenue Code of 1954 to provide a
Federal income tax credit for tuition.
1
Be it enacted by the Senate and House of Representa-
2 tives of the United States of America in Congress assembled,
3 SECTION 1. SHORT TITLE.
4
This Act may be cited as the "Educational Opportunity
5 and Equity Act of 1982".
6 SEC. 2. CONGRESSIONAL FINDINGS.
7
The Congress finds that it is the policy of the United
8 States to foster educational opportunity, diversity, and choice
2
1 for all Americans. Therefore, Federal legislation should rec-
2 ognize that-
3
(A) pluralism is one of the great strengths of
4
American society, that diversity in education is an im-
5
portant contributor to that pluralism, and that nonpub-
6
lic schools play an indispensable role in making that di-
7
versity possible;
8
(B) the existence and availability of alternatives to
9
public education tend to strengthen public education
10
through competition and to improve the educational op-
11
portunities of all Americans;
12
(C) Americans should have equal opportunities to
13
choose between the education offered by public schools
14
and that available in private educational systems and
15
should not be compelled because of economic circum-
16
stances to accept education provided by government-
17
created and government-operated school systems, and
18
that to force such a selection is an unfair and unjust
19
discrimination against persons of lesser means;
20
(D) increasing numbers of American families are
21
unable to afford nonpublic school tuition in addition to
22
the State and local taxes that go to support public
23
schools, and that tax relief for nonpublic school tuition
24
expenses is necessary if American families are to con-
25
tinue to have a meaningful choice between public and
S 2673 IS
3
1
private education at the elementary and secondary
2
levels;
3
(E) tax relief in the form of tuition tax credits is
4
the fairest way to extend a choice in education to a
5
wide range of individuals, that tax relief in the form of
6
tuition tax credits creates the least possible danger of
7
interference in the lives of individuals and families con-
8
sistent with achieving these ends, and that tax relief in
9
the form of tuition tax credits achieves these ends with
10
a minimum of complexity so that those for whom the
11
tax relief is intended will be able to understand and
12
take advantage of it;
13
(F) the tax revenue loss occasioned by a tuition
14
tax credit for a child would be small compared to the
15
cost to State and local taxpayers of educating the child
16
at a public school; and
17
(G) equality of educational opportunity is the
18
policy of the United States, and the tax relief afforded
19
by this legislation should not be used to promote racial
20
discrimination.
21 Therefore, the primary purpose of this Act is to enhance
22 equality of educational opportunity, diversity, and choice for
23 Americans. The Congress finds that this Act will expand op-
24 portunities for personal liberty, diversity, and pluralism that
25 constitute important strengths of education in America.
S 2673 IS
4
1 SEC. 3. CREDIT FOR TUITION EXPENSES.
2
Subpart A of part IV of subchapter A of chapter 1 of
3 the Internal Revenue Code of 1954 (relating to credits allow-
4 able) is amended by inserting before section 45 the following
5 new section:
6 "SEC. 44H. CREDIT FOR TUITION EXPENSES.
7
"(a) GENERAL RULE.-In the case of an individual,
8 there shall be allowed as a credit against the tax imposed by
9 this subtitle for the taxable year an amount equal to 50 per-
10 cent of the tuition expenses paid by the taxpayer during the
11 taxable year to one or more educational institutions for any of
12 his dependents (as defined in section 152(a) (1), (2), (3), (6),
13 or (9)) who has not attained the age of 20 at the close of the
14 taxable year in which the tuition expenses are paid and with
15 respect to whom the taxpayer is entitled to a deduction for
16 the taxable year under section 151.
17
"(b) LIMITATIONS.-
18
"(1) MAXIMUM DOLLAR AMOUNT PER INDIVID-
19
UAL.-The amount of the credit allowable to a taxpay-
20
er under subsection (a) with respect to tuition expenses
21
paid on behalf of each dependent shall not exceed-
22
"(A) $100 in the case of tuition expenses
23
paid during the taxpayer's first taxable year be-
24
ginning on or after January 1, 1983;
S 2673 IS
5
1
"(B) $300 in the case of tuition expenses
2
paid during the taxpayer's first taxable year be-
3
ginning on or after January 1, 1984; and
4
"(C) $500 in the case of tuition expenses
5
paid for each taxable year of the taxpayer begin-
6
ning on or after January 1, 1985.
7
"(2) PHASEOUT OF CREDIT ABOVE CERTAIN AD-
8
JUSTED GROSS INCOME AMOUNTS.-The maximum
9
amount specified in paragraph (1) shall be reduced by
10
the following percent of the amount by which the ad-
11
justed gross income of the taxpayer for the taxable
12
year exceeds $50,000 ($25,000 in the case of a mar-
13
ried individual filing a separate return)-
14
"(A) 0.4 percent for the first taxable year of
15
the taxpayer beginning on or after January 1,
16
1983;
17
"(B) 1.2 percent for the first taxable year of
18
the taxpayer beginning on or after January 1,
19
1984; and
20
"(C) 2.0 percent for each taxable year of the
21
taxpayer beginning on or after January 1, 1985.
22
"(c) SPECIAL RULES.-
23
"(1) ADJUSTMENT FOR SCHOLARSHIPS AND FI-
24
NANCIAL ASSISTANCE.-Tuition expenses paid by the
S 2673 IS
6
1
taxpayer shall be reduced by any amounts which were
2
paid to the taxpayer or his dependents as-
3
"(A) a scholarship or fellowship grant (within
4
the meaning of section 117(a)(1)) which is not in-
5
cludible in gross income under section 117;
6
"(B) an educational assistance allowance
7
under chapter 32, 34, or 35 of title 38, United
8
States Code; or
9
"(C) other financial assistance which is for
10
educational expenses, or attributable to attend-
11
ance at an educational institution, and that is
12
exempt from income taxation by any law of the
13
United States (other than a gift, bequest, devise,
14
or inheritance within the meaning of section
15
102(a)).
16
"(2) DISALLOWANCE OF CREDITED EXPENSES
17
AS DEDUCTION.-No deduction or credit shall be al-
18
lowed under any other section of this chapter for any
19
tuition expense to the extent that such expense is
20
taken into account in determining the amount of the
21
credit allowed under subsection (a) unless the taxpayer
22
elects, in accordance with regulations prescribed by the
23
Secretary, not to apply the provisions of this section to
24
such tuition expenses for the taxable year.
S 2673 IS
7
1
"(d) TAX CREDIT NOT ALLOWED FOR AMOUNTS PAID
2 TO RACIALLY DISCRIMINATORY INSTITUTIONS.-
3
"(1) REQUIRED ANNUAL STATEMENTS.-No
4
credit shall by allowed under subsection (a) for
5
amounts paid to an educational institution during a cal-
6
endar year unless, at the end of such calendar year,
7
the educational institution files with the Secretary (in
8
such manner and form as the Secretary shall by regu-
9
lation prescribe) a statement, subject to the penalties
10
for perjury, that-
11
"(A) declares that such institution has not
12
followed a racially discriminatory policy during
13
such calendar year; and
14
"(B) indicates whether the Attorney General
15
has brought an action against such institution
16
under section 7408 during such calendar year or
17
either of the two preceding calendar years.
18
On or before January 31 of the calendar year succeed-
19
ing the calendar year to which the statement relates,
20
the institution shall furnish a copy of the statement to
21
all persons who paid tuition expenses to the institution
22
in the calendar year to which the statement relates. No
23
credit shall be allowed to a taxpayer under subsection
24
(a) for amounts paid to an educational institution
25
during a calendar year unless the taxpayer attaches to
S 2673 IS
8
1
the return on which the taxpayer claims the credit
2
with respect to such calendar year a copy of the state-
3
ment specified in this paragraph.
4
"(2) DECLARATORY JUDGMENT PROCEEDINGS.
5
If an educational institution is declared to have fol-
6
lowed a racially discriminatory policy in an action
7
brought pursuant to section 7408, then no credit shall
8
be allowed under subsection (a) for amounts paid to
9
such educational institution-
10
"(A) in the calendar year during which the
11
Attorney General commenced the action pursuant
12
to section 7408, and
13
"(B) in the two calendar years immediately
14
succeeding the year specified in subparagraph (A).
15
"(3) DEFINITION.-For purposes of this subsec-
16
tion, an educational institution follows a 'racially dis-
17
criminatory policy' if it refuses, on account of race-
18
"(A) to admit applicants as students;
19
"(B) to admit students to the rights, privi-
20
leges, programs, and activities generally made
21
available to students by the educational institu-
22
tion; or
23
"(C) to allow students to participate in its
24
scholarship, loan, athletic, or other programs.
S 2673 IS
9
1
A racially discriminatory policy shall not include failure
2
to pursue or achieve any racial quota, proportion, or
3
representation in the student body. The term 'race'
4
shall include color or national origin.
5
"(4) TIME OF DISALLOWANCE.-N credit shall
6
be disallowed under paragraph (2) until the judgment
7
against the educational institution in the action brought
8
under section 7408 has become final. A judgment be-
9
comes final within the meaning of this paragraph when
10
all parties to the action have exhausted all appellate
11
review.
12
"(5) STATUTE OF LIMITATIONS.-If a credit is
13
disallowed under paragraph (2), the period for assess-
14
ing a deficiency attributable to the disallowance of such
15
credit shall not expire before the expiration of 3 years
16
from the date the judgment becomes final within the
17
meaning of paragraph (4). Any such deficiency may be
18
assessed before the expiration of such 3-year period
19
notwithstanding the provisions of any other law or rule
20
of law which would otherwise present such assessment.
21
"(6) ENFORCEMENT RESPONSIBILITY.-Exclu-
22
sive authority to enforce the prohibition against follow-
23
ing a racially discriminatory policy under this subsec-
24
tion, or to undertake activities connected with enforc-
25
ing this subsection, is vested in the Attorney General.
S 2673 IS
10
1
Under this subsection, the Secretary has authority
2
solely to receive the statements referred to in para-
3
graph (1); to disallow credits for amounts paid to an
4
educational institution which has failed to file such a
5
statement as provided in paragraph (1); to disallow a
6
credit in the case of a taxpayer who fails to comply
7
with the procedures prescribed by the Secretary for
8
claiming the credit; and to disallow credits for amounts
9
paid to an educational institution against which a final
10
judgment has been entered in an action under section
11
7408 as provided in paragraphs (2) and (4).
12
"(e) DEFINITIONS.-For purposes of this section-
13
"(1) EDUCATIONAL INSTITUTION.-The term
14
'educational institution' means a school that
15
"(i) provides a full-time program of elemen-
16
tary or secondary education;
17
"(ii) is a privately operated, not-for-profit,
18
day or residential school; and
19
"(iii) is exempt from taxation under section
20
501(a) as an organization described in section
21
501(c)(3), including church-operated schools to
22
which subsections (a) and (b) of section 508 do
23
not apply.
24
"(2) TUITION EXPENSES.-The term 'tuition ex-
25
penses' means tuition and fees paid for the full-time
S 2673 IS
11
1
enrollment or attendance of a student at an educational
2
institution, including required fees for courses, and does
3
not include any amount paid for
4
"(A) books, supplies, and equipment for
5
courses of instruction at the educational institu-
6
tion;
7
"(B) meals, lodging, transportation, or per-
8
sonal living expenses;
9
"(C) education below the first-grade level,
10
such as attendance at a kindgergarten, nursery
11
school, or similar institution; or
12
"(D) education above the twelfth-grade
13
level.".
14 SEC. 4. DECLARATORY JUDGMENT PROCEEDING.
15
Subchapter A of chapter 76 of the Internal Revenue
16 Code of 1954 (relating to judicial proceedings) is amended by
17 redesignating section 7408 as section 7409 and by inserting
18 after section 7407 the following new section:
19 "SEC. 7408. DECLARATORY JUDGMENT RELATING TO RACIAL-
20
LY DISCRIMINATORY POLICIES OF SCHOOLS.
21
"(a) IN GENERAL.-Upon petition by a person who al-
22 leges that he has been discriminated against under a racially
23 discriminatory policy of an educational institution, the Attor-
24 ney General is authorized, upon finding good cause, to bring
25 an action against the educational institution in the United
S 2673 IS
12
1 States district court in the district in which the educational
2 institution is located, seeking a declaratory judgment that the
3 educational institution has followed a racially discriminatory
4 policy and has, pursuant to such policy, discriminated against
5 the person filing the petition.
6
"(b) TIME FOR FILING PETITION.-The petition shall
7 be filed with the Attorney General within 180 days after the
8 date on which the act of racial discrimination is alleged to
9 have been committed against the person filing the petition.
10
"(c) NOTIFICATION AND OPPORTUNITY To COM-
11 MENT.-Upon receipt of the petition, the Attorney General
12 shall promptly notify the educational institution in writing of
13 such petition and the allegations contained therein. Before
14 any action may be filed, the Attorney General shall give the
15 institution a fair opportunity to comment on all allegations
16 made against it and to show that the racially discriminatory
17 policy alleged in the petition does not exist or has been aban-
18 doned.
19
"(d) TIME FOR BRINGING ACTION.-An action may be
20 filed by the Attorney General no later than 1 year after re-
21 ceiving the petition.
22
"(e) DEFINITIONS.-When used in this section, the
23 terms 'educational institution' and 'racially discriminatory
24 policy' shall have the same meaning as assigned to such
25 terms in section 44H.".
S 2673 IS
13
1 SEC. 5. TECHNICAL AND CONFORMING AMENDMENT.
2
(a) The table of sections for subpart A of part IV of
3 subchapter A of chapter 1 of such Code is amended by insert-
4 ing immediately before the item relating to section 45 the
5 following:
"Sec. 44H. Tuition expenses.".
6
(b) Section 6504 of the Internal Revenue Code of 1954
7 (relating to cross references with respect to periods of limita-
8 tion) is amended by adding a new paragraph (12) at the end
9 thereof:
"(12) Disallowance of tuition tax credits because of a
declaratory judgment that a school follows a racially dis-
criminatory policy, see section 44H(d)(5).".
10
(c) The table of sections for subchapter A of chapter 76
11 of the Internal Revenue Code of 1954 (relating to civil ac-
12 tions by the United States) is amended by striking out the
13 item relating to section 7408 and inserting in lieu thereof:
"Sec. 7408. Declaratory judgment relating to racially discriminatory
policies of schools.
"Sec. 7409. Cross references.".
14 SEC. 6. TAX CREDITS ARE NOT FEDERAL FINANCIAL ASSIST-
15
ANCE.
16
Tax credits claimed under this section shall not consti-
17 tute Federal financial assistance to educational institutions or
18 to the recipients of such credits.
S 2673 IS
14
1 SEC. 7. EFFECTIVE DATE.
2
The amendments made by section 3 of this Act shall
3 apply to taxable years beginning after December 31, 1982,
4 for tuition expenses paid after that date.
THE WHITE HOUSE
WASHINGTON
June 4, 1982
MEMORANDUM FOR BOB THOMPSON
FROM:
MORTON C. BLACKWELL Mcb/cs
SUBJECT:
Below Items
1.
I would appreciate if you could work with Senator Thurmond
and Congressman Kindness on a proposed timetable for committee and
floor action in both the House and the Senate on the Voluntary
School Prayer Amendment. The outside groups are working well but
they need to know the time frame in which we are operating. We
expect to be able to get votes in both houses before the elections,
2.
I strongly suggest that we not hold separate meetings
with the Catholics, the Protestants, and the Jewish supporters
of tuition tax credits. They all are in agreement now, having
been separately kept informed. It is important now that we make
them accustomed to working together on this topic. Jack Burgess
and I are in agreement that a single meeting rather than separate
meetings will be helpful next week. I have left the office for a
TV interview and to participate in the Virginia Republican State
Convention, but would appreciate your calling my staff this
afternoon on this subject. If you, Jack, and my staff will coordinate
this afternoon the calling of the meeting for early next week, we
can get them started on this issue.
3.
Thank you for your cooperation on the Woody Jenkins appoint-
ment to the Advisory Committee on Trade Negotiations. I trust this
will spring loose this appointment from Ed Rollins' office.
THE WHITE HOUSE
WASHINGTON
June 9, 1982
MEMORANDUM FOR ELIZABETH H. DOLE
THRU:
DIANA LOZANO
FROM:
MORTON C. BLACKWELL
m
SUBJECT:
Tuition Tax Credit Bill
Here is an update on the status of our working group's effort
to draft a passable tuition tax credit bill.
The major meeting was an eight and one-half hour meeting on
May 25 which included, at least initially, representation
from OPL, OMB, OPD, Treasury, Justice, and Education. Sub-
sequent meetings have refined our basic draft.
From the outset we realized that it would not serve the
President's interest to submit to the Congress a bill which
would fail to win support of the major supporters of tuition
tax credit, namely the key activists behind the major Catholic,
Protestant, Jewish, and secular private schools.
Most people involved are displeased with the proposal to set
income ceilings for families benefiting. But that (to me
outrageous) sop to our foes has not alienated any significant
supporters.
Our major controversy has been in the area of anti-discrimination.
Here we have to accomplish two tasks:
1. Make sure that no racially discriminatory school
could benefit from the provisions of our bill.
2. Make sure that we protect private, particularly
church-related schools from any further intrusion
in their operation by the Federal government.
In pursuit of these two goals, we developed many alternate
provisions for inclusion in the President's bill. I was
responsible for the circulation of four entire alternate
bills. These bills, along with other drafts of proposed
anti-discrimination provisions, were carefully and promptly
distributed by Jack Burgess and me among the major groups
supporting the concept of tuition tax credit.
- 2 -
Our effort was to bring these people gradually together as a
coalition with a consensus in favor of our final product.
Current status is this: the working group has achieved a
current draft which is supported by almost all the leaders
who favor enaction of a bill. The exceptions and qualifica-
tions are few and should not prevent adoption of our current
bill (or one very like it) by the President.
These are the remaining exceptions to full support among those
whose schools would benefit:
1. There will always be a small segment of the fundamentalist
Protestant community which will oppose any bill which
does not make church affiliation a bar to enforcement
of anti-discrimination provisions. The Bob Jones
University folks, for instance, will not favor this draft.
It should be noted here that we have made great progress
since the bitter tax exempt status discussions in January
with Protestant school leaders and conservative movement
activists. By bringing them and attorneys they trust
along with us in our deliberations, we have won the
dedicated support of this draft from the great majority
of the Protestant "Christian School Movement". This
despite the strong provisions in our bill which will
exclude all benefits to parents who choose to send their
children to church-operated but racially discriminatory
schools.
2. There is not yet unanimous support in the Catholic
community for this draft. The Catholic educators are
strongly with us, as are many key leaders of the church
heirarchy. Some liberal staffers at the Conference of
Catholic Bishops are dragging their feet. They have
declined to endorse or dondemn any of the drafts,
including the current one.
Discussions are continuing between OPD lawyers and
lawyers of the National Conference of Catholic Bishops.
We are also taking steps to brief Cardinals and other
top Catholic non-staffers, in an attempt to convince them
that the anti-discrimination provisions have real teeth
(which they do).
In my judgment, some of the Catholic staff liberals would
rather have no tuition tax credits than to have a Reagan-
passed tuition tax credit law. They know the points such
a law would score in their parishes for the President,
whom they are fighting in virtually all other legislative
areas. They have invested a great deal of effort in
planting in Catholic publications the suspicion that the
Administration is not serious about passing tuition tax
credit legislation.
- 3 -
The saving grace in this situation is that these
recalcitrant staffers cannot afford to accept the
blame themselves for failure to pass a bill this year.
If we handle this situation carefully, pressure from
the pews, from the Cardinals, and from the Catholic
educators will combine with fear of being pinned with
the blame for killing a good bill. The liberal Catholic
staffers may have no choice but to cave. They should
soon resign themselves to endorsing the bill, even
though we will get much credit for drafting and passing
tuition tax credits.
Among those who oppose tuition tax credits, or who don't care
either way, we will have three main problems:
1. Civil rights groups have an animus against private
education and can be relied upon to oppose any bill
which could be supported by the strong coalition which
supports tuition tax credit.
Mel Bradley is working hard to limit the intensity of
their opposition, which is the best we can look for.
As long as we can demonstrate the bill really has teeth
against racially discriminatory schools, we can proudly
defend it against criticism from this quarter. Moreover,
there are many black educators and black religious leaders
prepared to get out in frontfor this draft bill.
2. The NEA and the AFT are sure to oppose this bill, of
course. That opposition will be added to their opposition
to virtually everything else we are trying to do.
In this case, the teachers unions will be clearly self-
serving. The parents out there know how public education
has deteriorated as the teachers unions have grown. The
attractive idea of giving parents a means of escaping
from the teachers unions' monopoly will more than balance
the union opposition to the bill.
3. The internal hurdle the working group draft must clear
is sure to be the militance of some Treasury Department
officials. They will fight a last ditch turf battle
against this draft.
Our d:ra:ft requires that tuition tax credit schools have
501 (c) (3) status, which is under Treasury jurisdiction
and which carries with it the IRS anti-discrimination
requirements. But the draft adds another layer of anti-
discrimination requirements which will be enforced by
the Attorney General through the Civil Rights Division.
- 4 -
Although warned by Mr. Meese that Treasury will not
have a veto over the draft, Treasury officials have
shown utterly no interest in drafting a bill which
will pass.
If these Treasury people get their way, they will
lead the President back into January's tax exempt
status impasse. If they win this turf battle, the
bill will be a dead duck. The President would be
attacked by the liberal Catholic publications for
raising false hopes and by the Christian School
movement for supporting further IRS assaults on the
operations of their schools.
Our judgment was right in picking this issue for a major Presidential
initiative. If our draft is launched by the President, we will
win lasting credit with the growing percentage of parents of all
faiths who want the choice to opt out of the public school system.
The pressure will then be great for the public school systems to
shape up.
In its current draft, there will be more and better organized
grassroots effort in behalf of this tuition tax credit bill than
even for the Voluntary School Prayer Amendment.
THE WHITE HOUSE
WASHINGTON
6/10/82
Morton
EHA ashs that you
be sure she has the
info. to reply to Limmans
m. Clausen it against
fintion tax credits, apparently.
Can you chich on the
reply, if sent? If not,
we should send one.
thanks. EHA will
be birthing for this soon.
Diann
THE WHITE HOUSE
WASHINGTON
June 10, 1982
MEMORANDUM FOR ANNE HIGGINS
FROM:
MORTON C. BLACKWELL
mR
SUBJECT:
Letter from Bill Timmons
Mrs. Dole asked me to check to see if there has been
a response sent to Mr. Clausen of the Scottish Rite
Freemasons.
If there has been no Presidential reply yet sent, please
hold off a bit until we can work up a letter here. If
there has been a letter sent, please give me a copy for
Mrs. Dole.
The Masons have, as a cardinal article of their belief,
a commitment to public schools. This is a delicate
matter with this generally supportive group. Nothing,
of course, is likely to deter us from proceeding speedily
with submission to the Congress of a Presidential-
supported tuition tax credit bill.
UN
C.)
RECD
TIMMONS AND COMPANY, INCORPORATED
1850 K STREET, N.W. WASHINGTON, D.C. 20006 (202) 331-1760
June 8, 1982
WILLIAM E. TIMMONS
President
TOM C. KOROLOGOS
Executive Vice President and
Director of Legislative Affairs
MICHAEL L REED
Vice President and
General Counsel
HOWARD G. PASTER
Dear Elizabeth:
Vice President and Treasurer
JOHN M. NUGENT, JR.
I have tried several times to arrange a brief
Vice President and Secretary
meeting for the
MARY A. SIDLEY
semasons,
Southern
Vice President for Administration
to take five minutes of the President's time to
MICHAEL J. BATES
present his VO
Director of Research
Unfortunately, I have been unsuccessful even
though Mr. Clausen represents millions of Masons
who, by and large, agree with the thrust of the
Administration.
Tired of waiting, Mr. Clausen sent a letter to the
President on March 31, 1982 - a copy of which is
attached.
Elizabeth, LE a meeting is absolutely out.
of reach, could your office let me know
subs cantive rep resident
Grand Commander Clausen? He is a very important
person, and sense he has not been handled very
Thanks as always.
Sincerely,
Bill
William E. Timmons
The Honorable Elizabeth H. Dole
Assistant to the President
for Public Liaison
The White House
Washington, D. C. 20500
Encl.
MOTHER SUPREME COUNCIL OF THE WORLD
THE SUPREME COUNCIL
OF THE THIRTY-THIRD AND LAST DEGREE
ANCIENT AND ACCEPTED SCOTTISH RITE OF FREEMASONRY
HOUSE OF THE TEMPLE
SOUTHERN JURISDICTION, U. S. A.
1733 SIXTEENTH STREET, N.W. WASHINGTON, D.C. 20009
TELEPHONE 202-282-3579 CABLE SCSJUSA
HENRY C. CLAUSEN 33°
SOVEREIGN GRAND COMMANDER
March 31, 1982
The Honorable Ronald Reagan
President of the United States
Washington, DC 20500
Re: Tuition Tax Credits
S
Dear Mr. President:
May I invite your attention to an article in The Washington
Post of March 27, 1982, stating that The National Conference of Catholic
O
Bishops called on you to seek tuition tax credits for parents with children
in private and parochial schools.
I respectfully suggest that recent developments demonstrate the
action requested would be unwise as breaching that wall of separation
P
between church and state, counterproductive as a "budget buster," and
violate the Constitution. We need look no further than the November 1981
vote in the District of Columbia, for how the voters feel. They resolved
that issue against such a proposal about seven to one!
Y
The experiences in Iran, Northern Ireland, Lebanon and Egypt
show what happens when church and state merge. Drives are underway now
throughout the nation to inject religious beliefs into public schools
and to deprive Federal Courts of jurisdiction in cases of abuse. You may
recall my San Francisco law office in a three judge Federal Court won a
case that declared void a California legislative attempt for tuition tax
credits.
The Washington, DC vote was the subject of a Message from me
in our monthly magazine, The New Age, which goes to our over 650,000 plus
members, a copy of which is enclosed. The voting elsewhere, set forth in
my article, shows the proposal is never the will of our people, as follows:
- 2 -
State
Year
Against Aid
For Aid
District of Columbia
1981
90.7%*
9.3%*
Michigan
1978
74%
26%
Alaska
1976
54%
46%
Missouri
1976
60%
40%
Washington
1975
60.5%
39.5%
Maryland
1974
56.5%
43.5%
Maryland
1972
55%
45%
Oregon
1972
61%
39%
Idaho
1972
57%
43%
Michigan
1970
57%
43%
Nebraska
1970
57%
43%
New York
1967
72.5%
27.5%
Nebraska
1966
57%
43%
*Percentages based on unofficial election returns.
Additional voters sampling disclosed in three significant new opinion
surveys that there is continuing strong opposition to the plan.
An ABC News-Washington Post national poll in September showed 60%
opposed to tuition tax credit, a result almost identical to that of a Gallup-
Newsweek poll last spring.
Rep. Pat Williams, a Democrat who represents the heavily Catholic
half of Montana, polled his constituents on the tuition tax credit scheme.
The 20,000 who responded opposed the plan 60% to 40%.
Rep. Phil Sharp, a Democrat who represents the congressional district
around Muncie, Indiana, polled his district and found that of the 93% of the
13,000 respondents who had an opinion on tuition tax credits, the plan was
opposed 71% to 29%.
The Williams and Sharp polls are similar to those of Republican
congressmen Pritchard (WA), McClory (IL), Frenzel (MN), Regula (OH), and
Steers (MD), which showed opposition averaging 64%.
We can safely assume that most of the millions of Masons in our
Nation, and their families, feel as emphatic against such a proposal as did
the voters of our District in November.
Consequently, I urge that you deny the request.
Respectfully,
SOVERSIG GRAND COMMANDER
HCC/1gh
Enclosure (The New Age, Jan. 1982)
b/cc-All Actives & Deputies, Mother Jurisdiction
All Secretaries, Mother Jurisdiction
All California Chairmen & Assistant Chairmen
Masons in Congress
STATEMENT THE OF THE UNITED
White House Office of Policy Information
10
SEAL
STATES
ISSUE UPDATE
Washington, D.C.
July 13, 1982
This paper, prepared for Reagan Administration
officials by the White House Office of Policy
Information, articulates the philosophical
underpinnings of the President's Tuition Tax
Credits legislation.
TUITION TAX CREDITS
On June 22, 1982, President Reagan submitted to
Congress proposed legislation entitled "The Educational
Opportunity and Equity Act of 1982" which would provide
tuition tax credits to parents whose children attend private
elementary and secondary schools. While all presidents since
1969 have expressed support for the tuition tax credit
concept, President Reagan is the first to actually offer
legislation, thus fulfilling a pledge he made during the
1980 campaign.
In submitting the bill to Congress, the President
declared: "In order to promote diversity in education and
the freedom of individuals to take advantage of it, and to
nurture the pluralism in American society which this
diversity offers, I am transmitting to Congress today a
draft bill which provides federal tax credits for the
tuition expenses of children attending nonpublic primary and
secondary schools."
The proposal
The President's bill would permit individual taxpayers
to receive a credit against their income taxes of 50% of the
cost of tuition and fees for each child in non-public
elementary and secondary schools up to a maximum amount
established in the legislation. As proposed, the maximum
credit would be phased in over a three-year period, rising
from $100 in 1983, to $300 in 1984, and ultimately to $500
in 1985.
For taxpayers with adjusted gross incomes over $50,000,
the amount of credit would be proportionately reduced; for
families with incomes of $75,000 and above, the credit would
not be available.
-2-
Taxpayers could qualify for tuition tax credits only if
the schools their children attend are not-for-profit tax
exempt institutions, provide a full-time elementary or
secondary school program for eligible students, and do not
discriminate on the grounds of race or national origin.
The need for tuition tax credits
Americans have good reason to be proud of a public and
private educational system unrivaled in the history of
civilization. The enormous accomplishments of our people in
their 206-year history as a nation are a tribute, in large
measure, to the quality and diversity of educational
opportunity available to them.
But increasingly in the past few decades, the quality
and diversity of our educational system have become
threatened. In many schools, educational performance has
steadily declined, in-school crime and similar disturbances
have increased, and costs have continued to climb -- often
beyond what inflation and enrollment levels would seem to
justify.
The result is that growing numbers of Americans want a
greater choice in education, but many -- middle-income
Americans as well as low-income families -- cannot afford to
make a choice. In particular, parents who desire private
alternatives to public education are faced with a worsening
double burden of paying State and local taxes to support
public schools in addition to the rising tuition payments
required for their children who attend private schools.
Unless these problems are corrected, the quality and
diversity which have been a hallmark of the American
education system may further erode. To prevent that from
happening, we must increase educational freedom of choice,
improve tax equity, and provide greater competitive
incentives for improving school quality. Tuition tax credits
are an extremely effective means of helping achieve these
objectives.
Promoting educational freedom of choice
Tuition tax credits would help give parents the
financial means to make a genuine choice in deciding what
kind of education they wish to provide their children -- to
restore, in the words of the President, "the traditional
right of parents to direct the education of their children.'
At present, many parents' choice is limited by the
combination of high State and local tax payments (used to
finance local public schools) and the similarly high costs
of private tuition. Given the constraints on most families'
budgets, the extra burden of sending a child to private
-3-
school -- in terms of other family necessities they would
have to forego -- is often simply too great, even though the
parents may prefer that their children receive a private
education. Thus, the typical low- or middle-income family
may have no real option but to send its children to the
local public school.
While we know, of course, that many public schools are
doing a fine job of educating their students, parents who
are not satisfied should be able to send their children to
school elsewhere. The ability to make this choice should be
widely available, and not an option open just to the
wealthy.
A tuition tax credit would help expand this choice by
permitting a working family to keep more of its income to
devote to the education of its children. This tax savings
would allow the family to consider not only the local public
school, but various non-public schools as well. The family
could then evaluate each one and select the school which
would provide the best quality education for its children,
without cost being such a limiting factor.
Such a tax credit would provide the greatest benefit to
those who need it most -- low- and middle-income families.
Clearly, a fixed-dollar credit is of greater proportional
value to someone with a relatively lower income. Assuming,
for example, that all families spend 5% of their income on
education, an additional $500 savings doubles the education
budget of a $10,000 per year family, and increases by 40%
the budget of a $25,000 per year family. By contrast it
increases by only 20% the education budget of a $50,000 per
year family devoting the same percentage of its finances to
education.
Moreover, lower- and middle-income families are
proportionately the largest users of non-public schools,
even with the financial constraints. In 1979, fully 54% of
the students in private schools came from families with
incomes below $25,000.
Members of minority groups and the disadvantaged would
also benefit significantly. A 1978-79 survey by the National
Catholic Education Association, for instance, showed that
18.6% of the students in Catholic schools -- the nation's
largest private school sector -- were minority group
members.
Essentially, then, it is those students who have
received fewer educational advantages in the past who would
gain the most from tuition tax credits. That is why
economist Thomas Sowell has concurred with educational
economist E. G. West's evaluation that tuition tax credits
are "a crucial event in the history of education" with a
"revolutionary potential for low-income groups." The
proposal, Sowell maintains, is "most important
-4-
to those who are mentioned least: the poor [and] the working
class
Tax equity
The proposal is important to working Americans in
another way: it would promote greater equity in taxation.
Tax equity would be justified in any case, but it is
especially called for where government policies impose a
special burden, such as the requirement that all citizens
pay taxes to support the public schools, whether or not they
use them. Such policies should be constructed, as those in
this proposal are, so as to minimize any penalizing effect.
Present school tax policies, however, are obviously not
constructed that way. Low- and middle-income families who
choose to -- and are able to -- send their children to
private schools not only pay for the education of their own
children, but through their taxes pay for the public school
education of the children of other families -- including the
wealthy.
In addition, public school students now receive
substantial financial benefits from Federal programs.
Parents who choose public schools receive an average of more
than $600 per pupil in direct and indirect Federal aid -- a
total of as much as $25 billion. By contrast, children who
attend private schools receive very little Federal
assistance.
Tax credits will go a long way toward reducing this
unfairness. Of course, parents of children in private
schools should not -- and will not -- be exempt from
supporting their local public schools, since as members of
the community they indirectly benefit from the schools
whether or not their children attend them. At the same
time, these parents should receive some financial relief
from, in effect, having to "pay twice" -- relief which the
tax credits would provide.
Constraining the cost of education
The credits, moreover, are appropriate compensation for
parents even beyond equity considerations. Parents who send
their children to private schools relieve the public schools
of the costs of educating their children -- without
depriving the schools of the parents' tax payments. Not
only can this constrain the rise in taxes needed to finance
the public schools, but it can make more money per pupil
available in the public systems.
The savings can be significant. In Louisiana, for
example, non-public schools educated 152,000 students in
1980-81, thereby reducing the cost of operating public
schools in that State by $300 million.
-5-
Without the credits, however, public schools could
suffer through the potential influx of large numbers of
former private school students who could no longer afford to
attend the private institutions. For instance, if only one
tenth of the private school population of nearly five
million students shifted to public schools, the cost to the
public school system could increase by almost one billion
dollars. It is doubtful whether most public schools could
absorb such a cost increase and continue to maintain their
current educational standards.
Restoring competition in our educational system
By contrast, tuition tax credits would promote higher
educational standards in both public and private systems,
not only in the manner just described, but also by
stimulating a healthy competition between public and private
schools systems.
The vital role competition has played in our society,
in providing quality goods and services at affordable
prices, is well known. This economic principle applies in
the provision of education as forcefully as it does to any
other product or service. If a school has little or no
competition, it may lack the incentive to improve its
educational quality since its students, as virtual
"captives," have to attend the school regardless of its
educational standards.
If, however, the students have additional options, the
school would face the choice of either suffering an
undesired drain on its enrollment to other institutions, or
upgrading its standards in order to maintain its level of
student attendance.
Even some opponents of tax credits have begun to
recognize these beneficial effects of competition. A recent
New York Times editorial, for example, observed that "the
threat of tax credits served to jolt public education out of
its lethargy. In New York and other places public schools
now show encouraging signs of improvement."
This improvement in quality through competition would
provide the greatest help to those very poor families who
could not afford, in any case, to send their children to
other than the public schools. In fact, the prospect of
improving the quality of education available to low-income
minority youth through incentives in this manner was one of
the prime motives in leading the President to support tax
credits. Since these youth face considerable barriers in
their quest for upward financial mobility, the better
education that competition will produce will be an important
step in helping them to secure a job after they leave
school, and eventually in helping them to leave the cycle of
poverty.
-6-
Not surprisingly, some leaders among minority groups
have begun to recognize the advantages competition can
provide for their members. In 1978, for example, the
Congress of Racial Equality observed that "even just the
potential of parents being able to reject a school that is
not doing its job, can work great changes in the public
schools.
Anti-discrimination provisions of the bill
In addition to offering these educational and economic
benefits, the President's proposed legislation also provides
several protections to ensure that tuition tax credits
cannot be abused. The bill, for instance, contains strong
provisions to ensure that no credits will be permitted to
taxpayers who enroll their children in schools that
discriminate on the basis of race or national origin.
A credit cannot be claimed unless the school is tax
exempt under section 501(c)(3) of the IRS code.
Moreover, the bill contains its own strong enforcement
mechanism.
First, any school that wishes the parents of its
students to be eligible for a tuition tax credit must file a
statement with the Treasury Department each year attesting
that it has not followed a racially discriminatory policy.
If a school does discriminate after filing such a statement,
school officials would be subject to prosecution for
perjury.
Second, the bill authorizes the Attorney General, upon
complaint by a person who believes he has been discriminated
against by a school, to bring a law suit against the school.
If the Federal court then finds the school
discriminates, tax credits available to parents of those
attending the school are automatically taken away for three
years, retroactive to the year the discrimination suit was
filed.
While providing these powerful protections against
racial discrimination, the legislation also protects the
legitimate interests of private schools. A school cannot be
found racially discriminatory merely because it fails to
pursue or achieve racial quotas. In addition, a school is
free not to file an annual non-discrimination statement if
it does not wish the parents of its students to be eligible
for tuition tax credits. In that case, the enforcement
mechanism would not be applicable.
Moreover, the Attorney General cannot bring an action
against a school until it has had an opportunity to comment
on allegations made against it. This provision will enable
-7-
the Attorney General to prevent frivolous or malicious
complaints from reaching the courts. The Attorney General
must also give the school a chance to show that it has
abandoned a racially discriminatory policy. Finally, tax
credits cannot be disallowed until all court appeals have
been exhausted.
Safeguards against additional federal interference
The President's bill also prevents any increases in
Federal interference in the operation of private schools.
In the past, Federal aid to schools has all too frequently
been used as a means of infringing, either directly or
indirectly, on the operation of local schools in areas which
should properly be of no concern to the Federal government.
These Federal dictates -- the "bureaucracy's intrusive
reach into the nation's classrooms," as the Administration's
1981 year-end report described them -- have done little to
improve the quality of education, but they have done a great
deal to undermine local autonomy and promote a stifling
conformity which impairs educational quality.
The President's legislation specifically precludes an
increase in such interference by affirming that since the
tax credits are provided as tax relief to individuals rather
than as aid to institutions, they are not to be construed as
Federal assistance to schools. The bill will thus eliminate
the danger of Federal intrusion into private schools'
operations.
The constitutionality of tax credits
The bill preserves, as well, the constitutional
separation between Church and State. The bill will give tax
relief directly to students' families. No Federal payments
will be made to educational institutions, and the
bill specifies that no student for whom a tuition tax credit
is claimed will be considered a recipient of Federal
financial assistance. These safeguards provide adequate
protection to meet the relevant constitutional tests.
Indeed, while the Supreme Court has not ruled on
tuition tax credits, constitutional scholars and the U.S.
Department of Justice have concluded, after careful study,
that the President's legislation is constitutional.
There are, moreover, constitutionally-agreeable
precedents for this form of aid. For example, since the
proposed tax credits would be equally available for use at
sectarian and non-sectarian schools alike, they would be
similar to the tax deductions approved in the Walz case in
1970.
15
-8-
The tax expenditure argument
Finally, some have tried to argue that since the
proposed tuition tax credits would be a Federal "tax
expenditure," they would provide an unfair benefit to
private schools at a time when the growth in Federal aid to
public schools is being slowed.
Aside from the fact, already discussed, that the
credits will benefit students and not institutions, the idea
that when the government provides its citizens with a credit
against their taxes it is "spending government funds" is
wholly inappropriate. Such a notion implies that the
government has prior claim to all of a taxpayer's earnings,
and that whenever the government permits him, through a tax
credit or a tax rate cut, to keep a little more of his
income it is "giving away" Federal money. By contrast, the
President believes that an individual has first claim to
what he earns, and that the government can tax its citizens
only within strict limits.
That does not mean, of course, that all tax credits are
of equal merit. Tax credits, as opposed to general rate
cuts, are used to provide tax reduction in specifically
selected instances. While such credits should not be
automatically rejected because of the attachment of the
pejorative label of "tax expenditures," each must be
individually judged as to whether it is an appropriate form
of tax relief. Tuition tax credits, with their many
beneficial effects, are certainly well-justified by this
criterion.
Moreover, as the President has pointed out,
inflation-induced bracket creep, coupled with Social
Security tax increases, left most Americans paying more in
Federal taxes in 1982 than they did in 1981. Tax credits,
therefore, will permit working Americans to keep a
much-deserved extra portion of what they earn, to be used
for the worthwhile purpose of educating their children.
Conclusion
Tuition tax credits thus offer an important opportunity
for restoring the quality and diversity of an educational
system which has such a long-standing and valued tradition
in our society. In addition, the credits promise greater
educational choice, improved tax equity, and a much needed
measure of tax relief for over-taxed Americans.
The credits will, in the words of President Reagan, be
the means by which our society will be better able to
"provide the learning, shape the understanding and encourage
the spirit each generation will need to discover, to create
and to improve the lot of man."
#
Tartin
I
Tab
credit
THE WHITE HOUSE
WASHINGTON
Fry
June 23, 1982
Dr. Ron Johnson of Accelerated
Christian Education called and said
that Senators Dole and Benson had
agreed at a meeting yesterday that
they would not push the tuition
tax credit bill this year because
of the deficit etc.
He says that the christian community
is very upset due to the lack of
homework by the White House staff
regarding the sponsors. Also, if
it is a foregone conclusion that
this bill will not be pushed they
are upset that they have been asked
to go out and mobilize their troops
and spend money for no reason at all.
THE WHITE HOUSE
WASHINGTON
Copies sent to:
Kevin Hopkins
Ed Gray
Jack Burgess
Gary Bauer
Ken Cribb
Paul Weyrich
Dan Oliver (at home)
THE WHITE HOUSE
WASHINGTON
June 23, 1982
MEMORANDUM FOR ELIZABETH H. DOLE
THRU:
DIANA LOZANO
FROM:
MORTON C. BLACKWELL MB
SUBJECT:
Presidential Event-Tuition Tax Credit
Supporters
We did not have Tuesday afternoon any explanatory materials
on the President's proposed tuition tax credit bill to give
our meeting of 25 key national leaders. This was a shocking
display of organizational incompetence. We sent our best
tuition tax credit leaders away without any analysis of the
bill we expect them to fight for.
Ed Gray's deputy, Kevin Hopkins, drafted an issue update
paper. Ed Gray put that draft into circulation on Monday
with a request for comments by COB Monday.
Recipients were in general agreement on the high quality of
the draft. Most people made few, if any, corrections.
The only serious objections were raised by Gary Jones, newly
designated Under Secretary of Education. Jones suggested
deleting large sections of the update, primarily on the
ground that the paper exaggerated the problems of public schools.
To deal with Gary Jones' criticisms, Ed Gray convened a
meeting Monday evening in his office including himself,
Ann Fairbanks, Kevin Hopkins, Gary Bauer, Ken Cribb, and
me. Gray got Jones on the speaker. phone. We made a point-
by-point review of Jones's suggested changes. We modified
the language to soften it in many places. We accepted many
of his deletions.
In some cases, after discussion, Jones agreed to O.K. the
original language of the draft. Finally, all wording problems
were resolved to the satisfaction of all participating in the
discussions, including Jones. The only remaining points in
question were the documentation of a few statistics in the draft.
Ed Gray arranged for a 9:00 a.m. meeting Tuesday at which
Jones and Kevin Hopkins were to make sure all the agreed-upon
changes were made and to nail down the sources of some of the
statistics which Jones questioned.
- 2 -
We left Ed Gray's office Monday evening close to 8:00 p.m.,
confident that we had reached a consensus on the language
of this important document.
Tuesday morning at his meeting with Kevin Hopkins, Gary
Jones quickly reached agreement with Kevin on the numerical
data which he had questioned on Monday.
Incredibly, Jones then refused to "sign off" on the document.
Jones made it clear he would not be prepared to defend this
document, primarily on the ground that it would antagonize
supporters of the public school system. The previous evening
he had raised the same argument, causing us to edit the update
paper with him, point-by-point, until he was satisfied.
Of course the time to raise those objections and to request
further changes in the Issue Update was Monday evening, not
mid-morning Tuesday. His behavior Tuesday morning was an
outrageous, non-professional repudiation of the consensus we
took pains to reach with him on Monday,
Tuesday morning I spoke with Jones and expressed my diappoint-
ment at his conduct. He had agreed point-by-point as we
modified the document at his request Monday, but Tuesday he
announced he would hold himself aloof from this badly needed
document. My criticism peeled off a little of his composure.
He expressed great bitterness that he had not been involved
for eight weeks in the consensus process which resulted in the
wording of the President's bill. I mentioned that Mike Uhlmann
had included the Education Department's General Counsel, Dan
Oliver, in our working group which drafted the bill. This in
no way lessened Jones' anger at not being included himself.
Jones also bitterly complained he had only been given six
hours to review the proposed paper, as if he had been singled
out for persecution.
As a result of Jones' behavior, the strongest supporters of
tuition tax credits left the White House Tuesday afternoon
without any background analysis of the particulars of the
President's proposed bill. As the news media go to the friends
and foes of this important bill, our foes have their arguments
ready. As a result of Gary Jones' last minute objections, we
have sent out unarmed our best allies.
Our Roosevelt Room meeting was heartwarming for our visitors.
Both the President and the Vice President made good impressions
on the invited 'tuition tax credit leaders. The meeting was
like a Chinese meal, though. Almost immediately afterwards,
participants became hungry, in this case for more useful
information.
- 3 -
It happens that Gary Jones, who had blocked our White
House analysis, had scheduled his own media briefing on
the tuition tax credit bill at the Education Department
after our White House meeting adjourned. There he presented
a fact sheet and his views, which to the best of my knowledge
had not been cleared by the White House OPD. Those present
at his briefing tell me his was a performance with no sign
of pleasure or vigor.
I take the time to put this all down for you because you and
I hope this bill will come to a vote in each house this year.
If there is serious congressional consideration of our tuition
tax credit bill, Gary Jones must not be this Administration's
negotiatior. I have no confidence at all in him for this role.
Jones, like Secretary Bell, is primarily attached to the
public schools. No doubt his future lies in public school
administration. He is not liked or trusted by many Protestant
Christian school leaders. Jones was often reported last year
to lack enthusiasm for tuition tax credits, although now he
presents himself as spear carrier for this bill.
If he understands the importance of holding together the solid
coalition we have built behind the President's tuition tax
credit bill, he has yet to show it by his actions. Does Gary
Jones know or care about the political benefits which can flow
to the President and our congressional candidates? I doubt it.
Millions of people, historically locked into the Democratic
Party, would see the President championing this cause SO vital
to them.
If scuttling this bill is what it takes to keep his skirts clean
with the militant public school crowd, don't count on Gary Jones
to bleed for the President's bill. If we surrender any vital
point in the bill our tuition tax credit coalition has so strongly
endorsed, the coalition would promptly fly apart with vicious
recriminations directed from all sides, not at Jones, but at the
Reagan Administration.
Thus, in conclusion, I urge you to make sure that those who
put this coalition together, your office and Office of Policy
Development, be locked into the process before anyone,
expecially Gary Jones, starts to tamper with this carefully
balanced bill.
COMMAN
DOB PACKWOOD, OREG,
RUSSELL B. LONG, LA.
WILLIAM V. NOTH, m. DEL.
HARRY F. BYRD, M. VA.
JOHN c. DANFORTH, MO.
LLOYD BENTSEN, TEX.
JOHN H. CHAPEE, M.S.
SPARK M. MATEUNAGA, HAWAII
JOHN HEINZ, PA.
DANIEL PATRICK MOYNIMAN, N.Y.
MALCOLM WALLOP, WYD.
MAX BAUCUS, MONT.
United States Senate
DAVID DURENBERGER, MINN.
DAVID L. BOREN, OKLA,
WILLIAM L. ARMETHONG, COLD.
BILL BRADLEY, N.J.
COMMITTEE ON FINANCE
STEVEN D. SYMMS. IDAHO
GEORGE J. MITCHELL, MAINE
BUL 7' 1982
CHARLES K. GRASSLEY, IOWA
WASHINGTON, D.C. 20510
ROBERT K. LIGHTHIZER, CHIEF COUNSEL
MICHAEL STERN, MINORITY STAFF DIRECTOR
July 1, 1982
The President,
The White House.
Dear Mr. President:
I am aware of your desire to see your tuition tax credit
proposal quickly enacted. To facilitate Congressional action,
I have scheduled Finance Committee hearings on this legislation
A
on July 15, 1982. Full Committee hearings will also soon be
scheduled on your Enterprise Zone bill.
I expect the Committee will quickly move to markup these
matters.
Sincerely yours,
BOB Befa DOLE
Chairman
BD:a
THE WHITE HOUSE
WASHINGTON
July 7, 1982
FiG
MEMORANDUM FOR:
ROGER PORTER
FROM:
SHANNON FAIRBANKS
SF
SUBJECT:
Tuition Tax Credit Legislative Strategy
ISSUE
In spite of the hearings now planned for July 15, 1982, fear of
planned failure is growing among those who support tuition tax
credits. Support groups believe that last week's negotiations
over the revenue package (without a tuition tax credit - TTC -
amendment) forced the Administration into a strategy which
precludes its ability to see tuition tax credit legislation
passed in the 97th Congress.
DISCUSSION
The Citizens for Educational Freedom and the U. S.
Catholic Conference have raised these concerns. Both groups
question whether the Administration has a fallback strategy.
They ask that if such a strategy is in hand or now being formed,
they be notified.
Bob Baldwin of CEF called last Friday after talking with Morton
Blackwell. He had spent the prior week lobbying members of the
Senate to support a TTC revenue bill amendment. Buck Chapoton
then told Senator Packwood that the Administration would not back
a TTC amendment. In the absence of any known alternate strategy,
the Administration's credibility with those who must win this
fight was placed on the line.
The fight for TTC's is both ideological and political.
The ideological fight can be won any time within the President's
first term; however, the political benefit from the issue cannot
be reaped except this year. There are two reasons:
1. Expectations have been raised, and confirmed. The
President promised passage in the 97th Congress.
2. Because historical experience has bred consistent
patterns of promise/non-delivery, another TTC effort
that fails could unleash powerful resentment by strongly
motivated voters. We have made initial efforts to
capture this political support on the upside, no reason
to buy it unnecessarily on the down side.
2
RECOMMENDED ACTION
1. Confirm and sharpen the Aministration strategy to gain
passage.
2. Set up strategy consultation sessions immediately with the
relevant interest groups. Only they can win it for us.
3. Implement, but with the knowledge that the interest groups
must be kept informed.
CC:
Bob Thompson
Morton Blackwell
Jack Burgess
THE WHITE HOUSE
WASHINGTON
July 26, 1982
MEMORANDUM FOR ELIZABETH H. DOLE
THRU:
DIANA LOZANO
FROM:
MORTON C. BLACKWELL
MB
SUBJECT:
Tuition Tax Credits
As discussed in my memorandum to you of July 16, attached,
we do not yet have a meeting scheduled per the request of
Bob Baldwin last week.
As I noted in my weekly report last Friday, the situation
with respect to tuition tax credits is explosive.
We must get a serious legislative strategy in place and
communicated to the outside tuition tax credits coalition.
Otherwise, there will almost surely be a press conference in
a few days in which supporters of tuition tax credits will
give up the battle for passage this year and lay out for the
news media the failures and inconsistencies we have displayed.
Red Cavaney told me a decision had been made last week to go
forward with the meeting Bob Baldwin requested. Speed is
now required.
THE WHITE HOUSE
WASHINGTON
July 22, 1982
MEMORANDUM FOR ELIZABETH H. DOLE
THRU:
DIANA LOZANO
FROM:
MORTON C. BLACKWELL
M
SUBJECT:
Tuition Tax Credits Legislative Strategy
I am pleased that the Senior Staff meeting this morning
decided to act along the lines I suggested in my memorandum
to you yesterday.
I must emphasize that time is of the essence if we are to
take advantage of the remaining chances for legislative
success for tuition tax credits. For instance, today the
House Ways and Means Committee is marking up their version
of the revenue bill.
The organizations committed to tuition tax credits are not
political novices. They have been working for this legis-
lation in some cases for a generation. They closely follow
the legislative process. They know that any chance of
Presidential action convincing Congressman Rostenkowski to
include tuition tax credits in the revenue bill is slipping
through our fingers.
It is of the utmost importance that we knock heads together,
establish a precise strategy for winning, and expend signifi-
cant efforts toward implementing that strategy.
The supporters of tuition tax credits, particularly the
Catholic community, are on the verge of exploding against
us.
THE WHITE HOUSE
WASHINGTON
July 20, 1982
MEMORANDUM FOR ELIZABETH H. DOLE
FROM:
MORTON C. BLACKWELL
MCB/C
SUBJECT:
Tuition Tax Credits
Per our discussion this morning, here is a summary of our
situation and a suggested course of action.
Jack Burgess and I have been working closely with all ele-
ments of the coalition of organizations supporting tuition
tax credits. Without exception, these organizations have
had their confidence in this administration shaken by the
way in which we have handled the tuition tax credit bill.
During the drafting of the President's bill, all of these
groups were consulted on numerous occasions. As a result,
the bill is one of which the Administration can be proud and
which enjoys the determined support of all of the major
organizations in favor of tuition tax credits.
Here are the principal sources of the growing lack of
confidence in us on this issue:
1. At the Roosevelt Room meeting with the President and
Vice President and leaders supporting tuition tax credits,
Bob Thompson announced that the principal sponsors of the
President's bill would be Senator Dole and Congressmen
Gradison and Biaggi. For more than twenty-four hours after
this meeting, all reports coming from the offices of these
announced co-sponsors contradicted Bob Thompson's informa-
tion that they would be co-sponsors. Many supporters called
their offices to coordinate tuition tax credit activities
only to be shocked by denials. Word spread through the
coalition like wildfire.
2. Eventually the "principal sponsors" and their staffs
were locked into sponsorship. However, despite Administra-
tion announcements to the contrary, and despite the news
conference in which the President indicated his personal
support of this bill, our effective support is questioned.
Virtually every single supportive organization reports a
prevailing view among members and staff on Capitol Hill that
the Administration is not interested in fighting or bleeding
in behalf of this bill.
- 2 -
3. On July 13 we had a meeting of leaders of the tuition
tax credits coalition here. A dispute arose over the testi-
mony Assistant Secretary for Tax Policy (Treasury) Buck
Chapotin had given before the Senate Finance Committee on
July 2. Bob Baldwin of Citizens for Educational Freedom
insisted that Chapotin had specifically said the Admin-
istration does not favor placing tuition tax credits on the
pending revenue bill. Bob Thompson, Legislative Affairs,
just as stoutly insisted that Chapotin in fact said the
Administration did want to have the tuition tax credit bill
attached to the revenue bill. For some minutes the meeting
degenerated into a "Yes he did" - "No he didn't" exchange.
Subsequently Father Hoye of the U. S. Catholic Conference
obtained an unofficial transcript of Chapotin's testimony
which showed that Thompson was mistaken and Baldwin was
correct.
4. Despite the dispute over the content of Chapotin's
testimony, our July 13 meeting strove to reach an under-
standing of what the Administration's position was to be on
this bill in the future. Thompson clearly and emphatically
stated that our position is that we want this bill, if
possible, in the revenue bill. Because Senator Dole clearly
does not want it on the revenue bill in its initial passage
battle in the Senate, Thompson's statement of our position
came down to this:
(a) If it would be possible to attach the tuition tax
credit bill to the revenue bill in the Senate, the Admin-
istration would favor it, but Dole's opposition makes this
course unlikely.
(b) The Administration will fight hard to get tuition tax
credits attached to the revenue bill in the House and to
grease the way for Senator Dole to accept tuition tax
credits from the House Bill during the conference nego-
tiations.
Everyone left with this understanding of Administration policy.
Bob Thompson gave everyone the clear impression that he was
simply revealing our strategy to them.
5. Despite our assurance to the contrary, response to a question
at the Finance Committee hearing July 16, Treasury Secretary
Regan specifically said that the Administration does not favor
adding tuition tax credits to the revenue bill.
The attached memorandum of July 20 from Bob Baldwin reports
that "At this juncture leaders of the coalition are fearful
that there is no White House strategy or that tuition tax
credits is deliberately being sabotaged."
- 3 -
Surely these fears are warranted.
I suggest the following action:
1. SENATE BILL STRATEGY:
a.
Get Secretary Regan to write the Finance Committee
members a letter suggesting that the Administration would
strongly support attaching the tuition tax credit bill to
the revenue bill either in the Senate or from the House
bill in conference.
b. Send Bill Barr of OPD, Dan Oliver of Department of
Education, and Brad Reynolds of the Civil Rights Division
of the Justice Department to meet separately with Packwood
and Moynihan to assuage their concerns about the anti-
discrimination provisions in our bill.
c. Have the President recruit either Senator Armstrong
or Senator Grassley to move to attach the tuition tax credit
bill on the upcoming debt limit bill. The President should
also write to Senator Baker that he wants this accomplished.
If we have lost this chance on the revenue bill, due to
Senator Dole's opposition and/or our inability to communicate
our position to the Finance Committee, we have only the
debt limit bill option left to get tuition tax credits
through the SEnate on a piece of "must" legislation.
2.
SIMULTANEOUS HOUSE STRATEGY WITH SENATE STRATEGY
a. There are two ways the tuition tax credits could
11
be tied to the revenue bill in the House. First, Congress-
man Rostenkowski could be convinced to insert it in committee.
Second, the tuition tax credits could be added to the revenue
bill on the floor of the House through a bi-partisan coalition
led by Congressman Michel.
b. The President should call Congressman Rostenkowski,
urging him to put tuition tax credits on the revenue bill in
the House. We should pass the word to all supportive groups
that the President has urged Rostenkowski to take this step.
C. The President should contact Bob Michel, who will
very likely be given a modified open rule on the revenue bill
which would allow him a vote on one substitute to the forth-
coming committee bill. The President should ask Congressman
Michel to be sure to have tuition tax credits in his proposed
substitute.
- 4 -
d. The President should contact Senator Dole to get him to
agree specifically to support tuition tax credits in the
House-Senate conference if it comes over in a House bill but
is not in the parallel Senate bill.
3. WHITE HOUSE MEETING
We should schedule the meeting requested in Bob Baldwin's
attached memo and explain to the tuition tax credit coali-
tion that we have decided on the above strategies in both
Houses.
We are very close to disaster on tuition tax credits. This
disaster is entirely our own fault because we have given
either mixed signals or no signals or late signals to
outside groups, Republican congressional leaders, and
tuition tax credits supporters in the rank and file of both
houses of Congress.
Because both the revenue bill and the debt limit bill are so
far advanced, we do not have much time to decide on a
course of action. There are literally millions of people
who if properly approached on this subject would communicate
with their elected representatives in its behalf. These
grassroots supporters will not move unless their leaders
give them marching orders. Their leaders will not issue
marching orders to their troops unless they see us seriously
employing a strategy which can win.
Twiteon Tax realit
THE WHITE HOUSE
WASHINGTON
In the memo of July 12, to Elizabeth
H. Dole on Tuition Tax Credit Bill
Testimony, please note the change
on page 2, paragraph 3. "Rose
was uncooperative " should read
"
"Olson was uncooperative
THE WHITE HOUSE
WASHINGTON
July 12, 1982
MEMORANDUM FOR ELIZABETH H. DOLE
THRU:
DIANA LOZANO
FROM:
MORTON C. BLACKWELL
SUBJECT:
Tuition Tax Credit Bill Testimony
I understand that Buck Chapotin is scheduled to give testimony
before the Senate Finance Committee on Friday on our tuition
tax credit bill. This could be the source of serious problems.
You may recall that Chapotin gave us considerable grief in
the early stages of our coalition on tuition tax credits.
At first he insisted that we somehow incorporate in the
tuition tax credit bill the same prohibitions contained in
the Treasury Department's doomed tax exempt status bill.
Fortunately strong, explicit messages from Mr. Meese con-
vinced Chapotin the did not have a veto power over the
President's tuition tax credit legislation.
The Treasury Department did, however, have people at our
marathon meeting when we drafted the bill. They were not
constructive influences. The drafting group developed a
bill which could be supported by all of the major supporters
of tuition tax credits. Throughout the process, Chapotin's
representatives threatened us that Chapotin would not testify
in behalf of any bill which did not have anti-discrimination
language "as strong as the Bob Jones bill".
Just last Friday Kevin Hopkins and I had a spirited conver-
sation with Greg Ballentine of Treasury Department over the
wording of our White House Issue Update on tuition tax
credits.
At issue in the conversation with Ballentine was whether or
not the Issue Update would include an explicit rejection of
the "tax expenditure" argument which is raised frequently by
Senator Kennedy and others.
The President has repeatedly, explicitly rejected the tax
expenditure argument to the effect that the government has a
prior claim to all personal income and that tax cuts or tax
credits are "tax expenditures" of federal funds. Ballentine
said that Chapotin wanted the criticism of the tax expenditure
argument deleted from the Issue Update.
- 2 -
Because opponents of tuition tax credits will surely be
using this tax expenditure argument, I insisted that Admin-
istration spokesmen and other supporters of tuition tax
credits needed to have in the Issue Update a clear answer to
the tax expenditure argument. Finally, Kevin Hopkins and I
agreed to only minor modifications in the Issue Update text,
which Ballentine said he and Chapotin could then support.
You will recall my previous memorandum with respect to
Education Undersecretary Gary Jones' questionable role on
tuition tax credits. I think it is absolutely vital that
any testimony coming out of the Administration on tuition
tax credits be cleared through the normal processes here at
the White House. Otherwise, I consider it a certainty that
Chapotin, Gary Jones, or perhaps someone in the Justice
Department will give testimony so out of line with what the
tuition tax credit supporters expect that we will blow
apart our coalition.
Senator Dole may very well want to have someone to give
testimony on the antidiscrimination sections. In this case,
it is vital that such testimony be given by Jonathan Rose of
the Justice Departmënt Office of Policy Development or Brad
Reynolds of their Civil Rights Division, not by Ted Olson,
office of Legal Counsel. SON was uncooperative in both the
school prayer amendment drafting and the tuition tax credit
drafting. Bill Barr of OPD should clear all Administration
testimony on antidiscrimination language in this bill.
As you know, many Catholic and Protestant political activists
interested in tuition tax credits are wary. They suspect
officials of the Reagan Administration have put forward this
tuition tax credit bill as a ploy rather than as a serious
effort to enact legislation. At the U.S.C.C., particularly,
there are liberal staffers ready to leap at any opportunity
to charge the Administration with lack of good faith on this
issue.
We have a very strong coalition, most of which is actively
diverting resources to the tuition tax credit battle on the
strength of our representations to them. It would be foolish
in the extreme to allow any Administration spokesman to give
testimony on this important bill without fully clearing it
through our White House system.
EHD
Red
Blackwell
Document No.
Jack
Wayne
WHITE HOUSE STAFFING MEMORANDUM
If we have comments, need
DATE:
7/15/82
ACTION/CONCURRENCE/COMMENT DUE BY: to get in quickly-ASAP
SUBJECT:
DRAFT TESTIMONY OF SECRETARY REGAN BEFORE THE SENATE
COMMITTEE ON FINANCE (July 16)
ACTION FYI
ACTION FYI
VICE PRESIDENT
GERGEN
MEESE
HARPER
BAKER
JAMES
DEAVER
JENKINS
STOCKMAN
MURPHY
CLARK
ROLLINS
DARMAN
P
SS
WILLIAMSON
DOLE
WEIDENBAUM
DUBERSTEIN
BRADY/SPEAKES
FIELDING
ROGERS
FULLER
Remarks:
Richard G. Darman
Assistant to the President
(x2702)
Response:
DRAFT
July 14, 1982 - 7:00 p.m.
For Release Upon Delivery
Expected at 9:30 a.m., E.D.T.
July 16, 1982
STATEMENT OF
THE HONORABLE DONALD T. REGAN
SECRETARY OF THE TREASURY
BEFORE
THE SENATE COMMITTEE ON FINANCE
Mr. Chairman and Members of the Committee:
I am pleased to appear before you this morning in
support of S. 2673, which would provide an income tax credit
for 50 percent of certain elementary and secondary school
tuition expenses. The tax credit is intended to enhance
equality of educational opportunity for all Americans at the
elementary and secondary schools of their choice.
S. 2673 addresses an extremely important area of public
policy. The President has taken considerable personal
interest in its development. The Administration believes
that enactment of tuition tax credit legislation during this
session of the Congress is essential to maintain the
excellence of the American educational system and to protect
the right of American parents to determine how and where
their children will be educated.
S. 2673 would establish a tuition tax credit system that
will fulfill this Administration's commitment to parental
responsibility, educational excellence, and fiscal and
-2-
administrative restraint. The bill will further the
educational diversity that is the hallmark of our educational
system. It will make educational freedom of choice a reality
to more American families. It will target assistance on
those families that need it most. Finally, it will neither
interfere with the operation of private schools nor impose
costly administrative and regulatory burdens on them.
Equality of educational opportunity clearly requires
that a diverse range of schools -- public and private --- be
available to all American families, and that all American
families have the financial ability to permit meaningful
freedom of choice among schools. We believe that parents
have a fundamental right, and responsibility, to direct the
education of their children in a way which best serves their
individual needs and aspirations. Moreover, we believe that
parental involvement in the decision-making process enhances
the quality of education provided.
Private schools are essential to fulfilling our national
educational needs. They provide a healthy diversity of
approach, and are often a significant source of innovation
and experimentation. But private schools are expensive, and
inflation is making them more so. At the same time, higher
taxes caused by bracket creep are making it more difficult
for families to afford private education. Tuition tax
credits offer a simple means to assist these students by
-3-
permitting families to spend the money that they have earned
for the education they themselves select.
Tax credits are especially appropriate as a method of
assisting parents to educate their children at private
elementary and secondary schools. In this area, unlike
others we have discussed with this Committee in the past, tax
credits will not duplicate existing tax benefits. Tax
credits for tuition expenses have the additional advantage of
providing the same dollar benefit to all taxpayers. In
contrast, a deduction would provide a greater benefit for
individuals in higher tax brackets.
S. 2673 would allow an individual taxpayer to take a
credit against income tax in an amount up to 50 percent of
the qualifying tuition expenses paid by the taxpayer in a
taxable year. Qualifying tuition expenses are expenses paid
for tuition and fees to send certain dependents under the age
of 20 full-time to private elementary or secondary schools.
Qualifying tuition expenses do not include amounts paid for
books, supplies, equipment, meals, lodging, transportation,
or personal expenses, or for education below the first-grade
level or above the twelfth-grade level.
The credit is allowed only for expenses paid with
respect to students for whom the taxpayer is allowed a
dependency exemption and who bear any of the following
-4-
relationships to the taxpayer: children and descendants;
stepchildren; siblings, stepbrothers and stepsisters; nieces
and nephews; and members of the taxpayer's household, other
than the taxpayer's spouse, whose principal place of abode is
the taxpayer's home. To be allowed a dependency exemption,
the taxpayer must provide more than half of the student's
support for the calendar year in which the taxpayer's year
begins, and except for the taxpayer's children and
stepchildren, the student must have less gross income than
the amount of the exemption.
The amount of the credit that is allowable for the
taxable year with respect to a student is subject to two
limits. First, the maximum amount of credit that may be
claimed by the taxpayer for each student in any taxable year
is $100 for the taxpayer's first taxable year beginning on or
after January 1, 1983, $300 for the first taxable year
beginning on or after January 1, 1984, and $500 for taxable
years beginning on or after January 1, 1985. This ceiling
limits the relative benefit that the credit will provide to
parents whose children attend more expensive private schools.
Beginning in 1985, parents who send their children to private
schools with tuition of $1,000 or less per year will receive
a credit for a full 50 percent of tuition expenses. Parents
who send their children to more expensive schools will
receive a credit for a lesser percentage of tuition expenses.
-5-
The second limit contained in S. 2673 directs the
benefit of tuition tax credits to less wealthy families by a
phase-out of the credit for higher-income families. The
maximum amount of credit per student is reduced as the
taxpayer's adjusted gross income increases over $50,000 and
is phased out entirely for taxpayers with adjusted gross
incomes of $75,000 or óver. For the first taxable year
beginning on or after January 1, 1983, the $100 per student
maximum credit is reduced by .4 percent of the taxpayer's
adjusted gross income over $50,000; for the first taxable
year beginning after January 1, 1984, the $300 per student
maximum credit is reduced by 1.2 percent of the taxpayer's
adjusted gross income over $50,000; and for taxable years
beginning on or after January 1, 1985, the $500 per student
maximum credit is reduced by 2.0 percent of the taxpayer's
adjusted gross income over $50,000.
The amount of tuition expense for which a taxpayer is
allowed a credit does not include expenses that are paid by
scholarships and other educational aid that are not
includible in the taxpayer's or in the student's income. If
the scholarship is paid directly to the school and the school
sends a tuition bill to the taxpayer that is net of the
scholarship, the taxpayer is not deemed to have been paid the
scholarship; the scholarship is excluded from the computation
of tuition expense altogether.
-6-
A school with respect to which credits are allowable
must provide a full-time elementary or secondary school
program and must be a private, not-for-profit, day or
residential school.
In addition, the school must be exempt from taxation
under section 501 (a) as an organization described in section
501 (c) (3). Church-operated schools will, pursuant to section
508 (c), continue to be exempt from the provisions of section
508 (a) and (b), which provide that a new organization will be
treated as a private foundation uñless it applies for
501 (c) (3) status. The fact that credits are claimed for
payments to a church-operated school shall not serve as a
basis for imposing any new requirements on such schools in
this regard.
S. 2673 contains strong provisions to ensure that no
credits will be permitted for amounts paid to schools that
follow racially discriminatory policies. A racially
discriminatory policy is a policy under which a school
refuses, on account of race, to admit applicants as students;
to admit students to the rights, privileges, programs and
activities generally made available to students by the
school; or to allow students to participate in its
scholarship, loan, athletic or other programs. A racially
discriminatory policy does not include the failure by a
school to pursue or achieve any racial quota, proportion, or
-7-
representation among its students.
Three anti-discrimination enforcement mechanisms have
been written into the bill.
First, a tax credit cannot be claimed unless the school
is a tax-exempt organization under section 501 (c) (3). As you
are aware, the Administration strongly opposes granting tax
exempt status to schools that discriminate on the basis of
race. Litigation now before the Supreme Court will determine
whether continued IRS enforcement of this nondiscrimination
policy will require explicit legislation. If legislation is
found to be necessary, the Administration has already made it
clear that it favors a statutory solution.
Second, in order for tuition expenses to be eligible for
the credit, the school must annually file with the Secretary
a statement under the penalties of perjury that it has not
followed a racially discriminatory policy during that
calendar year.
Finally, the Attorney General of the United States, upon
petition by an individual who claims to have been
discriminated against by a school under a racially
discriminatory policy; may seek a declaratory judgment in a
United States district court in the district in which the
school is located that the school follows a racially
-8-
discriminatory policy. If a final judgment is entered that
the school follows a racially discriminatory policy and
pursuant to that policy discriminated against the person
filing the petition, tuition tax credits are disallowed for
the year in which the complaint is filed by the Attorney
General and the two succeeding calendar years. The
disallowance takes effect when all parties have exhausted
their rights to appeal the declaratory judgment.
This Committee has expressed its concern that aid not be
provided to discriminatory schools. The triple enforcement
mechanism that I have described will prevent use of tuition
tax credits to pay expenses at racially discriminatory
schools without interfering in the operation of private
schools and without subjecting private schools to costly
administrative burdens.
Finally, S. 2673 will assist American families to
educate their children at the schools of their choice without
significant fiscal impact. Our revenue estimates indicate
that the cost of the tuition tax credit program is less than
50 million dollars in fiscal year 1983; $400 million in
fiscal year in 1984; $900 million in fiscal year 1985; and
$1.3 billion in fiscal years 1986 and 1987.
S. 2673 is a bill that provides substantive tax relief
to the families of nonpublic school students, thereby
-9-
broadening and enriching educational opportunities, and
promoting excellence in our schools. The bill recognizes the
value of our private schools and will strengthen the right of
parents to decide the education of their children. The
Administration strongly supports S. 2673.