The House is expected to take up a bill (H.R. 7) that would expand education savings accounts (ESAs). The bill was approved, 21-16, by the House Ways and Means Committee on March 22. The vote was mostly along party lines, with Rep. Nancy Johnson (R-CT) crossing over to vote against the bill.
A bill (S. 1134) to expand ESAs also was approved by the Senate on March 2 (see The Source, 3/2/00, p. 1). The President has twice vetoed similar legislation, once as a stand-alone bill (H.R. 2646) in 1998 and again as part of last year’s tax package (H.R. 2488). The administration has indicated that another veto is planned if H.R. 7 or S.1134 arrives on the President’s desk.
The President and other opponents claim the measures would benefit high-income families disproportionately. However, supporters assert that the bills would help middle-class families save money for education.
Both bills would expand the ESAs established by Congress as part of the 1997 Balanced Budget Act (P.L. 105-34). The measure would expand the accounts from the current $500 maximum to $2,000. In addition to higher education costs, the measure would allow withdrawals to help pay for public or private K-12 education. Earnings on the accounts would remain tax-free, as would withdrawals used to help pay costs associated with education. In addition, both bills would extend tax breaks for businesses that donate computers to schools.
The House measure also contains several additional provisions. Under H.R. 7, state and local governments that issue bonds for public school construction would be given four years to spend the proceeds. Under current law, the proceeds must be spent in two years. The change is designed to make more funds available for school construction, as the state and local governments would owe less in rebate to the federal government.
During the mark-up, Rep. Johnson joined with the committee’s ranking member, Rep. Charles Rangel (D-NY), to offer an amendment to alter the bill’s approach to school construction funding.
Reflecting a plan backed by the Clinton administration, the amendment would have provided tax credits for zero-interest bonds to fund school construction. It was defeated by voice vote.
Other provisions included in H.R. 7 would:
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