OPINION:
While Congress bickers over whether to extend the George W. Bush tax cuts, one provision also set to expire is a tax break that helps children attend the school of their choice.
A form of education IRA known as the Coverdell Education Savings Account was incorporated into the sweeping Bush tax-cut plan a decade ago. It expanded a tiny college-only savings program to allow parents also to save tax-free for kindergarten-through-12th-grade education expenses, including private school tuition.
The Coverdell IRAs, as they are often called, are the only vehicle in our onerous federal tax code that gives parents a tax break and empowers school choice in America. Other school-choice options are left to the states.
The late Sen. Paul Coverdell, Georgia Republican, championed the idea of expanding a federal tax program for college tuition to include education expenses for children in kindergarten through 12th grade. He succeeded in getting a bill twice approved by Congress, but twice it met President Clinton’s veto pen.
Shortly after Coverdell’s sudden death in July 2000, President Bush incorporated the education IRA idea in his tax-cut plan. For the past decade, parents have been able to save up to $2,000 per child annually tax-free on interest earned for private school tuition or other education expenses, including tutoring or even the purchase of a computer.
If parents started saving once a child was born, they could accumulate a decent down payment toward private school tuition with the education IRA.
Unfortunately, as the lame-duck Congress is at loggerheads over whether to maintain the current tax rates or raise them, adults once again have forgotten the children. Kids will be the losers in a political battle over money. While there have been many impassioned speeches about the need for working Americans to keep more of their salaries, there has been silence about maintaining an education tax break that has made it easier for parents to send their children to better schools.
Financial institutions already have started urging parents with Coverdell IRAs to roll over their funds into tax-free college IRAs if Congress doesn’t fix this problem. Tax breaks for college IRAs will not be affected by the expiration of the Bush tax cuts. Only the Coverdell tax break, which opened the door to a private K-12 education, will expire.
But that shouldn’t make parents feel any better. College students and their parents already get plenty of assistance in their pursuit of a higher education. Starting with the GI bill, Pell Grants, other student loans and state lottery programs, college students are offered government subsidies, tax breaks and other programs supporting their public and private choices for higher education.
Most parents of children stuck in the monopoly of public schools pay taxes and accept the education offered their child whether it is acceptable or not. For parents who can scrape together enough money for private school tuition, the Coverdell accounts help make private school a little more affordable.
When Coverdell was alive, these education savings accounts won bipartisan support, including from Sen. Joe Lieberman of Connecticut. Congress today certainly is more partisan than in the late 1990s, but parents also are more desperate to have more K-12 options. Congress should remember that as the clock ticks down to Dec. 31.
If the House and Senate can’t settle their standoff on the Bush tax-cut plan before we slip into 2011, they should at least address this education IRA for kids. A lame-duck Congress will be truly lame if it adjourns with an outcome that hurts children.
Robert Enlow is president of the Foundation for Educational Choice, launched by Milton and Rose Friedman.
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