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Tax Reform Legislation Pleases Educators

According to Kevin Casey, director of federal/state relations for Harvard, in the past the tax exclusion has expired and caused confusion among University officials and employees.

"One of the important features is to have some sense of certainty as it goes forth," Casey said. "To have a permanent exclusion would be preferable but this will provide some level of certainty."

Financing Families

The bill also contains a number of provisions designed to ease the burden of financing higher education.

The joint legislation would raise the annual contribution limit families can make to education savings accounts (ESAs) from $500 to $2000.

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In addition, the bill would permit private prepaid tuition plans to enjoy the same benefits as state prepaid plans--allowing families to accrue interest from investments tax-free.

According to Casey, establishment of prepaid private tuition plans was not a "priority issue" for Harvard since the University does not currently participate in similar plans currently existing in Massachusetts.

Students would also directly benefit from a portion of the legislation which allows individuals to earn tax credits for interest on higher education loans for the life of the loan, effectively repealing a current 60-month limit.

Read My Lips

While higher education may stand to gain from this legislation, the reforms might still fail to become law.

President Clinton has promised a veto, calling $792 billion in tax cuts too drastic.

According to a Treasury Department official, the Clinton administration agrees with the repeal of the 60-month time limit on interest tax credits for higher education loans and the extension of tax exclusions on employer-provided educational assistance programs for all levels of higher education.

But the administration does oppose the IRA deduction for charitable contributions, the establishment of private prepaid tuition plans and--most vehemently--a portion of the ESA reform that would allow for deductions to be spent on K-12 education.

The President vetoed the so-called Coverdale bill in 1997 because it contained a similar provision.

"We're very much against expanding education IRAs," said the Treasury official, noting that the broad guidelines allow money to be withdrawn tax-free for programs only tangentially related to education, such as for sports programs or extracurricular hobbies.

But, he added, "there are so many other aspects that raise questions of distributional equity that the education IRA has taken a back seat."

Despite the Clinton administration's disagreement with aspects of the GOP's tax legislation, many of bill's education provisions could still eventually be signed into law.

"We're thinking that they could come back in the fall and pass all of the outstanding bills and put tax provisions into that," said Johns. "So there is another immediate chance of getting some tax provisions done.

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