that I think both would be constitutional but I understand your

concern.

Mr. JENKINS. Thank you.

Mr. FRENZEL. Thank you, Mr. Chairman.

I want to congratulate my cosponsor, Mr. Railsback, for his scholarly discussion of this most complicated aspect of the bill.

I have trouble sorting out secular purposes, and primary effects, and excessive entanglements, and I am certainly grateful for your counsel in this matter.

I think the preponderance of testimony has been supporting the position you take with respect to constitutionality, but I think everyone would agree that if we pass such a bill, it will certainly go to court. We will all be scratching our heads trying to figure out what those nine old men are going to do.

Mr. RAILSBACK. I will have to concede that.

The CHAIRMAN. You have been very helpful to us.

Our colleague from Ohio, Congressman Charles W. Whalen, is in the room.

We are very pleased to welcome you.

STATEMENT OF HON. CHARLES W. WHALEN, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO

Mr. WHALEN. I appreciate this opportunity to appear before your committee today to discuss proposals which would grant tax credits for educational expenditures. The measures which have been referred to your panel, Mr. Chairman, fall into two categories. One group of bills provides across-the-board relief, applying to children enrolled not only in institutions of higher learnings, but in primary and secondary schools as well. The other extends credits only for the costs of college tuitions.

On the surface, tuition tax credits seem to promise an attractive solution to the shortcomings of existing educational assistance programs. Yet when analyzed in the light of five relevant criteria, this approach clearly is defective.

First, enacting tuition tax credits would be inconsistent with current public sentiment which demands reform of our tax code. At a time when total "tax expenditures" approximate $124.4 billion yearly, the American people want fewer, not more, tax breaks in the law. It seems to me, therefore, that the Congress should be seeking to eliminate "loopholes," not creating new ones.

Second, tuition tax credits would be inequitable.

A. They are exclusionary. They apply only to those who elect, or who are able, to send their children to college or private schools. They ignore those parents who do not opt for a private education for their sons and daughters. They ignore those who cannot afford to send their youngsters to college or to a private school. Finally, they ignore those parents who must maintain college-age children who either do not choose to pursue a higher education or who are unequipped to do so. B. They benefit most those with higher incomes. The Congressional Budget Office, for example, estimates that under S. 1570 over 60.3 percent of the total benefits would go to families with incomes in excess of

$25,000; over 25 percent of the tax writeoff would accrue to families in the $40,000 and above classification.

Third, implementing a tuition tax credit plan would promote further segregation of our Nation's public schools by encouraging a shift of middle and higher income children to private institutions. We cannot overestimate the important role our egalitarian public school system has played in the progress of this country.

The late James Bryant Conant once described the purpose of education:

The primary concern of American education today is not the development of the appreciation of the "good life" in young gentlemen born to the purple * * *. Our purpose is to cultivate in the largest possible number of our future citizens an appreciation of both the responsibilities and the benefits which come to them because they are Americans and are free.

To date, we have overcome temptations to separate the brightest or the elite; and in recent years we have made reasonable progress toward racial desegregation of our public school systems. By increasing Federal support of private institutions, we threaten an erosion of local taxpayer support for public education.

Fourth, tax credits for tuition to parochial schools undoubtedly would be voided by the courts as not meeting the standards of separation of church and state. The Federal courts, in such cases as Committee for Public Education v. Nyquist, and Meek v. Pittinger, consistently have held that tax benefit programs for parents of nonpublic school children are unconstitutional.

Fifth, tuition tax credits, if adopted, would add to an already large Federal budget deficit. Federal expenditures for education currently are $11.7 billion annually. Estimates for 1-year costs in lost revenue for tuition tax credit proposals range from $1.2 billion (credit for college tuitions only) to $6 billion (across-the-board credits). In the light of existing Federal expenditures for education, plus the fact that tuition credits would benefit principally those who already can afford to send their youngsters to the schools of their choice, such an addition to the deficit appears inappropriate.

Mr. Chairman, after examining the effects of the tuition tax credit proposals, I am convinced that this approach does not merit positive action by the Congress. I believe we can find fairer and more effective ways of providing financial assistance to middle and lower income families which are burdened with heavy educational expenses.

Mr. MIKVA [presiding]. In the temporary absence of our chairman, let me thank you for your statement and tell you how much we appreciate the fact that you are willing to take on the role of swimming upstream. I believe you are certainly the first congressional witness, and one of the few witnesses altogether, who have been willing to take on this idea.

Mr. WHALEN. I might just interrupt here. I have sort of established the habit of swimming upstream, Mr. Mikva.

Mr. MIKVA. Those of us who have been your colleagues appreciate that quality in you and we will miss it.

If, in fact, this may be an idea whose time has come in some variation, and I sat on the Social Security Conference Committee when we were at the sword's point with the other body on this very issue, un

germane as it was, would you comment on what you think could be done that would at least partially alleviate some of the ills you feel would befall our society if we went the way of the tuition tax credit? Is it your view that we should and can only enhance the present grant and loan program or are there some other variations that you might think would be possible?

Mr. WHALEN. This would be my view. I think the tax credit involves a principle, regardless of the dollar amount. If that principle is invoked, it is either appropriate or inappropriate, depending upon the view of the individual holding it.

I would certainly support a program such as suggested by President Carter, which would provide additional assistance to those parents who have youngsters in college. The purpose of the program obviously is to provide greater assistance to those famiiles which would be in the middle-income classification.

Mr. DUNCAN. I have no questions other than to welcome our colleague to the committee.

Mr. JENKINS. You seem to be as confident that this would be unconstitutional as the previous witness was that it would meet the constitutional test. Undoubtedly, you read the Nyquist case and the line of cases previous to Nyquist and derived the exactly opposite view. Mr. WHALEN. Well, Mr. Jenkins, I followed with interest the discussion with Congressman Railsback. Let me say that he has an advantage on me, or some may view it a disadvantage-he is an attorney and I am not.

Let me make some expanded comments regarding the fourth point. Obviously it is directed only at tax credits for those parents who have children in private primary and secondary schools.

Now, I frankly don't think it is the role of Congress to try to prejudge the Supreme Court in terms of constitutionality of legislation before us. I do think, however, that we have had a number of cases which would be comparable if this were passed and went to the Supreme Court.

I know that in the State of Ohio, the legislature several years ago, passed very similar legislation providing State income tax credits for parents of youngsters in private primary and secondary schools. This was declared unconstitutional.

Nevertheless, I believe that the real issue is whether such legislation is good public policy. Thus, the constitutionality issue is not the linchpin of my testimony here this morning. I think it could be arranged, such as was done in the case of the 18-year-old vote, that the constitutional question went directly to the Supreme Court before implemantation.

The Supreme Court, you will recall, held that what we had done in the case of the 18-year-old vote was constitutional so long as it applied only to Federal elections.

So I think the questionable clause could be separated if Congress, in its wisdom, felt that if it were constitutional it would be good public policy.

Mr. JENKINS. In the Ohio case, was it decided by a Federal district court?

Mr. WHALEN. As I recall, it was a Federal case, and I think it was considered along with several other State tax credit cases.

Mr. JENKINS. Thank you for your testimony.
Mr. FRENZEL. Thank you, Mr. Chairman.

I would like to thank our colleague for his excellent testimony, which I wish was not quite as good as it was.

Mr. WHALEN. I realize that you are a strong supporter of your own legislation, Mr. Frenzel.

Mr. FRENZEL. Yes, oddly enough. You indicated that this would reward parents who could afford their children otherwise. In what level of income do you think people can afford to educate their children?

I notice you are leaving our august body here with a flock of children of your own to educate, and I presume that you are going to go out and get rich so you can do it.

Mr. WHALEN. Let me say that my problems are just beginning. I have six children, the oldest of whom is a senior in high school. I just dipped into my pocket a few moments ago to send him up to a college in New England for a visit, so I certainly am looking down the pike and I know that my coffers will be depleted.

Mr. FRENZEL. Well, at what level of income do you feel that you can afford all of this?

Mr. WHALEN. Well, obviously, it depends on a number of factors, one of them being, as you suggested, the number of children which one has to educate. If one has six or eight children, even if his income were high, he would certainly face, I think financial problems in undertaking that education.

I do believe, however, we have to look at college education particularly as an investment. Within that context it seems to me that those who go to college, who receive a college degree, and who go even beyond college and receive master's degrees, over the long run receive much higher incomes than those who do not go to college.

I think if we view college education as an investment, then certainly we should look at programs designed to provide loans or assistance which ultimately would be repaid out of the returns on that investment.

Mr. FRENZEL. What I wondered was this. The program of the President which you endorsed gives interest subsidies up to $45,000 of income and would you object to a tax credit that would apply to $45.000 of income?

Mr. WHALEN. I am opposed to any tax credits. The President's program calls for repayment. So what we are doing here is setting public policy that higher education is a sound investment and therefore

Mr. FRENZEL. I don't see any difference between giving an interest subsidy or giving a tax credit of so much.

Mr. WHALEN. I think there are two differences. One, we have under existing programs the requirement that loans be repaid with interest. Under a tax credit, that is an outright grant or so-called tax expenditure which is not repaid.

Second, as I already pointed out, the tax credits are not as equitable as either a grant or loan program.

Mr. FRENZEL. Well, I have a lot of trouble sorting out the difference between interest subsidy and a tax credit other than that the tax credit seems simpler to me.

Mr. WHALEN. It would correspond to the first point I made. Our tax code now is replete with breaks, and it seems to me that the public is crying for the closing of these so-called loopholes and here we are making another one. Your committee is now considering the President's tax proposal which would eliminate or reduce some of those breaks and yet at the very same time you are also considering proposals which would further expand tax expenditures.

Mr. FRENZEL. Well, I concede that. Of course, the President himself served us up about 15 more loopholes in his energy package so he is not terribly concerned.

Mr. WHALEN. Let me give my definition of tax reform. I don't want to prejudge your committee, Mr. Chairman. It does seem to me, however, that your committee and the Congress are under great pressure from those who benefit from tax expenditures and it would be my guess that there probably will not be a great deal done by the Congress in terms of eliminating these so-called breaks or loopholes. Indeed, we have seen in the Senate efforts undertaken to emasculate some of the reforms that were initiated by the Congress in 1976.

So I would give a new definition to tax reform, that being "tax reform is not opening further loopholes."

Mr. FRENZEL. I thank the gentleman for his excellent testimony.

The CHAIRMAN. Mr. Whalen, you have certainly given a very good argument that this committee will have to consider in making our decision.

I think the one on public opinion would have to probably remain up in the air. I don't know exactly where public opinion is on this matter. Looking, however, at the other issue, if as between expanded grant and loan programs and a tax proposal, are you taking a position there? Mr. WHALEN. Yes, I have indicated that the grant-loan program is more acceptable and I would certainly concur with Congress expanding the present program. As I suggested to Mr. Frenzel, I think there are two distinct differences between that approach and the use of tax credits.

First, in many instances those Federal funds or those Federal loans are repaid.

Second, I think they go to the hardship cases whereas, as I have indicated, the tax credits help those primarily in the middle and higher income brackets.

The CHAIRMAN. One of our problems is that no matter what we do, in a $5 billion program, it isn't going to help too much in defraying the exceedingly high cost here.

Mr. WHALEN. That is correct. For example, a family of four in a $10,000 per year income bracket would benefit very little from a tax credit program. Under President Carter's new tax proposal, that family would have a tax liability, according to the Library of Congress, of approximately $192. This means, therefore, that even under a tuition credit program, they would not receive the full benefit.

The CHAIRMAN. One of the most difficult cases are those where they have two or three or four children in school at the same time. I think the grant and loan program could be more helpful in that area than a straight tax credit.

Mr. WHALEN. As I suggest, it seems to me that that type of program really hits the hardship cases.