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Clinton Emphasizes Need for Education Tax Breaks at State of the Union Address

Wednesday, February 5, 1997

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To help Americans get the education they need, President Clinton said in his State of the Union address Feb. 4 that he will propose in his fiscal 1998 budget request targeted tax cuts worth $38.6 billion over five years.

Clinton also emphasized in his speech commitment to balancing the federal budget, strengthening the American family, and working to improve America’s standing with nations’ abroad.

"The number one priority for the next four years will be to ensure that all Americans have the best education in the world," Clinton said.

Expected to be formally unveiled Feb. 6 as part of the fiscal 1998 budget, Clinton will propose scholarship tax credits of up to $1,500 per year for the first two years of post-secondary education for low- and middle-income families and a $10,000 tax deduction for college or job training.

Clinton will propose an income exclusion for forgiveness of certain student loans and extend the exclusion for employer-provided educational assistance through Dec. 31, 2000.

Expanding Individual Retirement Accounts also will be included in the budget and, if passed, will enhance education by allowing penalty-free withdrawals to cover post-secondary education expenses, as well as allowing penalty-free withdrawals for first-time homebuyers and unemployment expenses. Clinton also will propose doubling the income limits on deductible IRAs and creating a new back-loaded IRA.

Commitment to fight the deficit

Clinton reiterated his commitment to balancing the budget by 2002. The plan to be unveiled later in the week "balances the budget and provides middle class tax relief." Clinton will propose a phased-in $500 tax credit for dependent children under 13 that will cost $46.7 billion over five years.

According to Clinton, the best part of his balanced budget plan is that "it does not require us to re-write our Constitution." Clinton long has opposed a balanced budget amendment on the grounds that it is a phony solution to the deficit problem and that it could restrict government during dire economic times or times of national crisis.

The nation also must complete welfare reform so that "people who must work can work," he said. To help achieve this goal, Clinton will propose a tax credit for employers that would be worth 50% of the first $10,000 of annual wages for the first two years of employment of former welfare recipients.

Republican responses

Senate Finance Committee Chairman Bill Roth, R-Del., in a statement issued Feb. 4 expressed hope that congressional Republicans and the President can work together to enact legislation advancing common goals.

"I am very much in agreement with President Clinton that we need to make college more affordable for Americans," Roth said. Any steps taken to make college more affordable must not inflate the cost of education expenses, he warned.

Roth also was pleased that Clinton mentioned his support for expanding IRAs. "I hope we can agree to give all Americans the ability to save in tax-deferred accounts this year."

Also reacting to the President’s speech, House Budget Committee Chairman John Kasich, R-Ohio, said that he agreed with much of what Clinton said, but that is the problem. No indication was given about what the President’s priorities are, Kasich told reporters after the speech.

The formal response

Rep. J.C. Watts, R-Okla., delivered the Republican response in which he called upon the President to work with Congress to cut taxes, balance the budget, and strengthen American values.

Watts urged the President to work with Congress to pass across-the-board tax cuts. "Working Americans need real tax relief, not just the so-called tax cuts to help one group at the expense of another. We all pay too much in taxes," Watts said.

Another common goal the President and Congress should work together on is balancing the federal budget. To achieve that goal, Watts urged Clinton to join the GOP and support a balanced budget amendment to the Constitution. The Senate will begin consideration of a Balanced Budget Amendment today.

Support for an amendment may be wavering in the House, where some supporters hinted they might withdraw their support unless language requiring a super-majority vote to raise taxes also is included in the bill.