AUGUST 11, 1997
The 1998 Balanced Budget Agreement and Tax Plan: What it means for Washington State Education
by U.S. Senator Slade Gorton
The balanced budget and tax relief agreement reached between Congress and the President is an historic achievement: It will completely eliminate the federal deficit by the year 2002 and provide the American people with their first real tax cut in 30 years. It also represents a success for our higher education system.
Congressional Republicans crafted a tax package that provides nearly $92 billion in tax cuts over the next five years. Washington state's higher education system, which already boasts lower than average tuition rates in the country, will greatly benefit from this agrement. For years, parents and students have lamented the rising costs of a college education.
Unfortunatly, this discourages many prostpective students from even considering a college education. The good news is that the balanced budget agreement and the tax relief package takes the first step toward making higher education more affordable and providing tax credits to encourage and finance higher education for all students.
Delivering on past promises to make education a top priority, Congress provided $35 billion worth of tax cuts strictly for education. The majority of this $35 billion will go to those who need it most: middle-income taxpayers who will benefit from the expanded Hope Scholorship program. The Hope program will provide $1,500 scholorships for each of the first two years of college for middle income students.
Recognizing that saving for a college education in this day and age can't be accomplished overnight, Congress demonstrated the foresight to establish education IRA's. The FY 1998 tax package creates new, tax-free Education Savings Accounts, which will allow parents to begin saving for their children's education well before they send their kids to college.
Parents will be able to use these savings for K-12 expenses and for higher education costs. Other provisions in the tax bill will allow parents to use their retirement IRA's for education purposes and make state prepaid tuition plans tax exempt.
The Republican tax package also provides assistance to students facing that daunting task upon graduation: paying off their student loans.Unfortunately, the high default rate on student loans has created alarmingly high interest rates. In practice, this forces responsible taxpayers who are not only making the payments on their student loans to pick up the tab of individuals who skip out on their financial obligation. Our tax package addresses this injustice by providing a deduction for interest on all student loans.
The Republican Congress has delivered on its promise to make education its top priority. This balanced budget agreement and tax package will ease the financial concerns of students and parents who are attempting to finance an affordable college education. Congress can help ensure our students academic success.