bulk of all income in the United States goes to families "in the middle" who cannot escape paying a proportionate share. Taxpayers with an adjusted gross income between $5,000 and $15,000 accounted in 1960 for 58 percent of all income and paid 55 percent of the Federal individual income tax. The steeply graduated rate schedule makes for a sharp progression between the upper and lower end of the scale, but yields only small revenue. A flat 20-percent rate on the reported income in 1960 would have brought in 87 percent of the actual yield. It has been estimated that the tax rates over 50 percent yield less than $1 billion, out of a total yield between $40 and $45 billion annually, and rates over 65 percent slightly over one-quarter billion.

Labor compensation and welfare payments accounts for a steadily growing share of all personal income-presently 78 percent-while the share of dividends and business income has been shrinking. Less than 10 percent of all personal income in the country accrues to individuals and families in the $25,000 a yearand-up category. A government that claims 25 percent of its citizens' income, as the Federal Government now does, cannot get a major share of its revenue from an upper class that receives less than 10 percent of all personal income. Only a small share of the Federal taxes is paid by the rich, simply because there are not enough of them, and very little of the State and local taxes is paid by the poor. Most of the taxes in the United States are eventually paid by the great mass in the middle of the income scale.

That Federal personal and corporate income tax rates are too high, repress economic growth, and cause unemployment is now generally recognized, and the President has proposed to reduce their rates. Because the Federal Government has been using income taxes up to and more likely beyond--their bearing capacity, State and local governments rely more heavily on sales and property taxes. The claim that those taxes are sharply regressive has been disproven by several studies which showed that both types of taxes are about proportional through much of the income range and regressive only at the two extreme ends; in top and bottom brackets they slightly alleviate the heavy progressivity of the Federal personal income tax.

The property tax, which plays such a major role in the school finance picture, has been more often and more bitterly assailed than any other tax: by the taxpayers because it is too big and rises too fast and by the school forces because it is too little and rises too slowly; by some because it is restricted and by others because the restrictions are not tight enough; by some because assessments are too low and by others because they are too high. The real curse of the property tax which primarily accounts for its unpopularity is that, in contrast to almost all other taxes, it is not hidden but out in the open, clearly labeled by purpose. What is more, it identifies the official who is doing the taxing. Such relationships are veiled or obscured for sales and income taxes, particularly at the Federal level. The trouble with the property tax is that the taxpayer knows that he is paying it, what he is paying for, and who is taxing him.

That property tax revenues do not respond to economic expansion and grow too slowly is disproven by the record: Since World War II collections of property taxes have increased 291 percent, of all other taxes combined only 121 percent. A similar relationship prevailed in prior periods except during war and depres sion. One reason for the rapid increase in property tax collections during the postwar period: contrary to what is widely believed, national wealth has been growing more rapidly than national income.

Homeowners, who in the national average pay approximately one-third of all property taxes, have understandably been complaining about ever bigger tax bills. It is not widely realized that the homeowner offsets a substantial part of his real estate tax against the Federal income tax because (a) local taxes and mortgage interest are deductible items; (b) imputed income on his equity is not taxable. The homeowner's net burden is far less than the amount he actually pays. A $4,000-a-year man who is married, has two children, owns a $10,000 home with a $9,000 mortgage, and pays $140 in real estate taxes, saves $103 on his Federal income tax. If his mortgage totals only $4,000, he saves $89. In other words, he recoups 64 to 74 percent of his real estate tax by a reduction in his Federal income tax. Savings in other brackets are comparable. In an appendix to my book, "Taxes for the Schools,"" which contains a comprehensive

30 The Institute for Social Science Research, Washington, 1960.

chapter on property taxes, I showed several examples of income tax offsets by homeowners in various income brackets. I am attaching a copy to this

statement.

If your committee feels that the homeowner should get greater relief, then it might consider the proposal in S. 181 to grant an income tax credit up to $100 for school property taxes. This would either lighten the load of homeowners or enable school districts to boost their taxes without adding a direct burden on their local taxpayers.

If so, it would seem appropriate also to grant tax credits-similar to those I proposed in higher education-to the patrons of nonpublic schools. Such credits could result in very substantial savings for taxpayers. The average cost for one pupil through 12 grades of public school now amounts to about $4,800, in addition to the large capital outlay for elementary and high school facilities. Modest relief through tax credits may cause many more parents to send their children to nonpublic schools and reduce the need for public school funds by several times the amount of the tax credit.

BROADER ASPECTS OF FEDERAL GRANTS-IN-AID

I mentioned earlier that the church and state question has in recent years been in the center of the debate over Federal grants to education, but that there were also other objections which had prevented legislative action. Some of them reiate specifically to education, others to the principle of Federal grants-in-aid as such.

Soon after President Truman's Commission on Higher Education (1946-48) advocated a comprehensive program of Federal aid, the Association of American Universities sponsored a commission on financing higher education to restudy the subject. The commission's members included: Detlev W. Bronk, president of Johns Hopkins University; Paul H. Buck, provost of Harvard University; Carter Davidson, president of Union College; Lee A. Du Bridge, president of the California Institute of Technology; J. E. Wallace Sterling, president of Stanford University: Henry M. Wriston, president of Brown University, and others. Its executive director was John D. Millet, now president of Miami University. The Commission concluded:

This commission has reached the unanimous conclusion that we as a nation old call a halt at this time to the introduction of new programs of direct Federal aid to colleges and universities. We also believe it undesirable for the Government to expand the scope of its scholarship aid to individual students. Or position is based on what we regard as conclusive considerations." "

One member of the commission, President Carter Davidson, explained soon

after:

One broad highway to financial security the members of the commission Ved unanimously as the 'primrose path the leads to the everlasting bonfire.' This road was named Federal Government support. Some of us at first felt that we should even advocate that the Federal Government should withdraw its pport from those areas which it is now already subsidizing, but we finally agreed that this step was impracticable and that we would be satisfied if the Federal Government would stop where it now is and give to private initiative the chance to show that it really believes sufficiently in higher education to give ample support. There was a feeling that increased Government support from Federal sources was not only a blind alley, but also blinded those who traveled

down it.""

The commission feared that expansion of Federal grants-in-aid to higher education would jeopardize the institutions' freedom, diversity and independence: Such independence will be threatened if higher education is subjected to further influence from the Federal Government. That influence flowing from present support is already a cause for concern. Its withdrawal or its unwise Biministration would produce grave results for our institutions. But in our Tw, as things are now, such exigencies as these can be weathered.

We are

"Nature and Needs of Higher Education," the report of the commission on financing her education, Columbia University Press, 1952, pp. 157-158.

1951

Carter Davidson, "Blind Alleys in College Finance," the Educational Record, April

cost of their contribution. So, many of them do not now contribute. By per mitting tax credits-such as I suggested in the schedule for tuitions and feespersons in low- and medium-income brackets could be encouraged to donate more liberally to higher education.

Gifts to higher education amounted to more than $1 billion in 1961, according to the Council for Financial Aid to Education, an increase of 28 percent over the total 2 years earlier. By materially widening the range of potential contributors, the granting of tax credits could very substantially augment this important source of support for IHL.

ENROLLMENT OUTLOOK

In trying to design an effective program of Federal aid to IHL, it is, of course. important to know how great the needs are, or are likely to be several years hence. I, therefore, reviewed some of the recent estimates of facility require ments of IHL. Those estimates usually are based on the outlook for enrollments which, as we all know, are growing at a rapid rate.

The Under Secretary of HEW, Mr. Ivan A. Nestingen, said in a speech on April 3, 1963: "Two years from now the first large wave of college applicants will hit our institutions across the country. This is the bumper crop of babies born in 1946, just after World War II. They will be succeeded by other large waves of students seeking college entrance."

The President was specific in his message on education of January 29, 1963: “*** our educational system faces a major problem of quantity-of coping with the needs of our expanding population and of the rising educational expectations for our children which all of us share as parents. Nearly 50 million people were enrolled in our schools and colleges in 1962-an increase of more than 50 percent since 1950. By 1970, college enrollment will nearly double, and secondary schools will increase enrollment by 50 percent-categories in which the cost of education, including facilities, is several times higher than in elementary schools."

This suggests that the rate of enrollment growth is increasing and will pose a greater problem to our educational system in the next 8 years than it did in the past 12. However, enrollment projections by the Bureau of the Census and the Office of Education, the two offices which regularly engage in such studies, indicate a slowdown.

Source: Bureau of the Census, Current Population Reports, Series P-20, Nos. 52 and 120; Bureau of th Census, Current Population Reports, Series P-25, No. 232.

So, according to the Census Bureau, all educational enrollment grew 66 per cent between 1950 and 1962 and may, in the next 8 years, expand between 14 and 21 percent, for an average of 17 percent. Data in a census report of January 10, 1963, captioned “Decline in Rate of Increase in School Enrollment." sugges that the lower estimates are more likely to materialize. Taking the Censu Bureau averages, high school enrollment will rise not 50 percent but about 2percent, college enrollment will not nearly double but increase 51 percent Reports by the Office of Education show virtually the same picture. They projec an enrollment increase between now and 1970 of 14 percent in elementar schools, of 24 percent in high schools, and in both combined of 17 percent (aver age of four projections). At the college level, Office of Education studie

Office of Education, "Enrollment in Public and Nonpulbie Elementary and Secondar Schools, 1950 80, Circular 692, 1962.

suggest an increase in college enrollment between fall 1962 and 1970 of 55 percent as the average of three projections which range from 25 to 67 percent.) It is true that colleges will grow faster than other schools. But even according to the highest projections, colleges will account for no more than 12 pereent of all enrollment by 1970, and their influence on the total cost of education will be correspondingly small.

A comparison of past and future rates of growth should preferably be based on periods of equal length. When we compare enrollment expansion in 195462 with projections for 1962-70, we find that the rate of growth is expected to decline at every level of education. Here are the data computed from reports of the Bureau of the Census:

Source: Bureau of the Census, Current Population Reports, series P-20, Nos. 89 and 120; Bureau of the Census, Current Population Reports, series P-25, No. 232.

Projections by the Office of Education, in the publications which I cited above, closely parallel those by the Census Bureau. They suggest that educational enrollment will, over the next 8 years, grow at about half its rate over the past 8 years, and that, even in the colleges and universities contrary to what is widely believed-the rate of growth will decline.

Enrollment trends at the elementary-secondary level have an important bearing on higher education. Fall 1963 may see the last of the big attendance jumps in the common schools. As the postwar babies graduate, annual increases will shrink to half the size they maintained in the past dozen years. For some time the States have had to concentrate their funds on the rapidly expanding common schools. In the future they will be able to channel a larger share of their resources into higher education.

During the 1950's enrollment grew at a faster rate than GNP or national income. Between 1962 and 1970 GNP is generally expected to advance between and 37 percent (equals 3 to 4 percent p.a.), for an average of 32 percent. This is almost twice the expected rate of increase in educational enrollment. Thus, the problem of financing education should gradually become easier to solve, its weight less burdensome to bear.

COLLEGE AND UNIVERSITY FACILITY NEEDS

The President stated in his education message that in the 1960's “23 billion of new facilities will be needed" in colleges and universities and an attached fact sheet explained: "To provide for additional students, replace obsolete structures, and modernize usable buildings, institutions of higher education should invest an average of $2.3 billion annually. Expenditures currently fall short of this by $1 billion."

Several projections of facility needs in IHL were prepared in recent years. me study by the American Council on Education estimated 1958-70 requirements for academic, auxiliary, and residential facilities "from a high of $15 billon to a low of $19 billion." That averages between $1 and $1.2 billion per year which, at the time, seemed a steep increase because capital outlays had been running about half that volume up to the mid-1950's.

Office of Education, "Economics of Higher Education," Selma T. Mushkin, editor, 1962,

and Opening (Fall) Enrollment in Higher Education, 1962," Circular No. 697,

John D. Long and J. B. Black, Jr., "Needed Expansion of Facilities for Higher Educa195-70," American Council on Education, 1958.

10

The Office of Education published a study in 1960 which placed the cost of new facilities and replacement, rehabilitation, and depreciation between 1958 and 1970 at $1.2 billion annually. As the volume of higher educational construction expanded and outlays reached, and then exceeded, $1 billion annually, need estimates also climbed and kept well ahead of simultaneous expenditures. In 1961 the Office of Education placed needs during the 1960's at an average of $1.9 billion per year." The authors computed requirements over the 10-year period 1961-70 at $18.9 billion, of which $16.4 billion (equals 87 percent) appeared likely to come from current sources (if apparent trends continued); this left a deficiency of $2.5 billion.

How did the President arrive at an estimate of $23 billion with a deficiency of about $10 billion (equals 43 percent)? The author of the earlier Office of Education study prepared a more elaborate report in which he showed three projections of cumulative facility needs 1961-70: high, medium, and low, at $22.9, $18.8, and $16.3 billion, respectively." The medium projection was unchanged from his earlier report, but the newly added high project equalled the amount used by the President.

It may be helpful at this point to recall our experience with the classroom shortage in the public schools. The Office of Education placed the deficiency in 1950 at 250,000 classrooms. In October 1954 the Commissioner of Education testified that it had risen to 370,000, and the chairman of the Senate Committee on Labor and Public Welfare stated on January 27, 1955, that "each day the shortage of classrooms grows more severe * * and predicted that "within 3 years our shortage of classrooms throughout the Nation will have climbed to 600,000." 1

Two months later the Secretary of HEW testified that the estimates had been reviewed and that "we find that the estimated classroom deficit by the year 1959-60 would be 176,000 classrooms rather than 407,000." 14 When the school year 1959-60 came around, the Office of Education reported the shortage at 135,264 and has since lowered its estimate to 121,235 in the fall of 1962. It also proved that the fears in 1955 that the school construction would be unable to keep up with the enrollment increase had been groundless: The number of pupils per classroom dropped from 29.4 in the fall of 1955 to 27 in the fall of 1962.15

Of the 600,000 new classrooms which the President indicated in his education messages of February 20, 1961, and February 6, 1962, to be needed during the 1960's, at least 210,000 were completed in the first 3 years, which corresponds to a decennial construction rate of 700,000.

Similar wide variations exist in the need estimates of facilities in IHL. The deficiency in higher educational facilities-that is, the gap between estimated needs and prospective revenues from presently available sources-will, by 1970, equal $2.5 billion according to a study of the Office of Education, which Secretary of Health, Education, and Welfare Abraham Ribicoff presented to your committee on August 17, 1961, or to nearly four times that amount, as suggested by a fact sheet of the Department of Health, Education, and Welfare in January 1963.

Part of the trouble is that there are no uniform and unchangeable standards of facility needs in either school or higher education, nor is there agreement on the degree of effective space utilization that can be expected. We may profitably review some of the studies that have been made on space utilization in IHL and on proposals to use available facilities more fully.

10 "College and University Facilities Survey," pt. 2. by Robert W. Bokelman; pt. 3, by Louis A. D'Amico and E. Eugene Higgins, Office of Education, 1960.

11 "Physical Facility Needs of American Higher Education, 1961-70," in: "Aid for Higher Education," hearings before the Subcommittee on Education, Committee on Labor and Public Welfare, U.S. Senate, 87th Cong.. 1st sess., 1961, pp. 42 ff.

12 "Economics of Higher Education," op. cit., p. 193.

13 "Emergency Federal Aid for School Construction," hearings before the Committee on Labor and Public Welfare, U.S. Senate, 84th Cong., 1st sess., 1955, p. 1.

14 "Federal Aid to States for School Construction," hearings before the Committee on Education and Labor, House of Representatives, 84th Cong., 1st sess.. p. 282.

15 Enrollment, Teachers, and School Housing," fall 1960, Office of Education, 1960. Office of Education, release, Jan. ? 1963.