While Congress continues to bicker over whether to continue the Bush tax cuts, one provision lost in the debate and also set to expire is a tax break that helps children attend the school of their choice.
Known as the Coverdell Education Savings Accounts, this education IRA was incorporated into the sweeping Bush tax cut plan a decade ago. It expanded a college-only savings program to allow parents to also save for k-12 education expenses tax-free, including private school tuition.
The Coverdell IRAs, as they often are called, are the only vehicle in our onerous federal tax code that give parents a tax break and empower school choice in America. Other school choice options are left to the states.
The late U.S. Sen. Paul Coverdell, a Georgia Republican, championed the idea of expanding a federal tax program for college tuition to include education expenses for children in grades k-12. He succeeded in getting a bill twice approved by Congress, but it twice met the veto pen of President Bill Clinton.
Shortly after Coverdell’s sudden death, President George W. 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 whether to maintain the current tax rates or raise them, adults have once again forgotten the children. Kids will be the losers in a political battle over money if Congress adjourns Dec. 31 without adopting the current compromise that includes the extension of the Coverdell accounts.
Financial institutions already had started urging parents with Coverdell IRAs to roll over their funds into tax-free, college IRAs if Congress failed to extend the education accounts. Tax breaks for college IRAs will not be affected by the expiration of the Bush tax cuts. Only the Coverdell tax break that opened the door to a private school, k-12 education will.
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.
For most parents of children stuck in the monopoly of public schools, they 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 U.S. Sen. Joseph Lieberman of Connecticut. Congress today is certainly more partisan than in the late 1990s, but parents are also 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 its standoff on the Bush tax cut plan before we slip into 2011, then it 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 and CEO of the Foundation for Educational Choice, the legacy school choice foundation of Milton and Rose Friedman.
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