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Tax Breaks for Parents with Kids in Private Schools?

Legislation recently passed by the House would allow parents to establish tax-favored savings accounts to pay for their children's K-12 private school education.

Legislation that would allow parents to establish tax-favored savings account to pay for the education of costs of their child's K-12 school years was passed last week by the U.S. House of Representatives, "largely along party lines," writes the Washington Post (10/24).

The bill would allow parents with adjusted gross incomes of less than $110,000 a year, or $160,000 for couples, to open an account to pay for education expenses, including tuition, fees, tutoring, books, supplies, transportation and computer equipment and software, reports the paper.

Taxpayers would be allowed to contribute $2,500 a year per student through 2002. After that time, the limit would drop to $500 a year. Under the proposal, interest earned would be tax free.

Some White House aides labeled the plan "bad education policy and bad tax policy," and they are urging President Clinton to veto any such measure. Opponents charge that wealthy families would be the primary beneficiaries of the plan. "You don't help public schools by siphoning off money for elite, private schools," said Rep. Lloyd Doggett (D-Texas).

Similar accounts for higher education were created this summer under legislation that was part of the balanced-budget agreement, notes the paper. The K-12 plan is estimated to cost the U.S. Treasury $2.6 billion in reduced revenues through 2002, according to an analysis by the congressional Joint Committee on Taxation.

Sen. Paul Coverdell (R-Ga.), prime sponsor of the education account plan, said the Senate probably will consider the bill before adjourning for the year. He is optimistic that the bill will earn Congressional approval.

House Speaker Newt Gingrich (R-Ga.), in support of the bill, said: "The worst case in the worst neighborhood of the poorest families, they should have the same right to choose as the rich who go to private schools."

Source: Daily Report Card 10/27/97

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11/03/97