Camp Suggests Separating Education Tax Change From Revamp

House Ways and Means Committee Chairman Dave Camp signaled that he might break off a piece of the U.S. tax code revamp he outlined last week and try to advance it separately.

Camp, a Michigan Republican, asked Treasury Secretary Jacob J. Lew today whether the administration would consider consolidating and simplifying tax breaks for education without resolving the partisan divide over whether individual tax changes should raise additional revenue.

That may mean a shift in Camp’s approach, which has been to push for a comprehensive approach to U.S. tax law changes rather than more targeted initiatives.

Lew, testifying at a hearing of Camp’s committee in Washington, offered a noncommittal answer.

“Simplification is a desirable goal,” he said. “But we also have different objectives that are achieved by different provisions.”

Camp’s draft proposal, released Feb. 26, would lower tax rates on individuals and corporations and remove dozens of tax breaks.

As a package, the changes are unlikely to advance this year, because of reluctance from Republican leaders to allow a vote on politically contentious proposals and Democrats’ insistence that major tax changes yield additional revenue.

Four Breaks

The education portion, based on legislation from Democrat Danny Davis of Illinois and Republican Diane Black of Tennessee, would consolidate four tax breaks into one.

The consolidated credit would cover 100 percent of the first $2,000 in expenses and 25 percent of the next $2,000. People could collect up to $1,500 even if they have no tax liability. The break would phase out with income, making married couples with annual income of more than $126,000 ineligible.

The administration’s proposal would extend a temporary expansion of the American Opportunity Tax Credit, which phases out at higher income levels and can be claimed by married couples making as much as $180,000.

Obama’s budget plan says that approach offers “targeted tax relief to an even greater number of middle-income families facing the high costs of college.”

Camp’s proposal also would repeal the deduction for student loan interest and prohibit new contributions to Coverdell education savings accounts.

Camp may have an ally in Ron Wyden, an Oregon Democrat and new chairman of the Senate Finance Committee.

Yesterday, during his first hearing as chairman, Wyden criticized the “mind-numbing rules and definitions” for education tax incentives.

“There are ways to improve those incentives not just in the short term but for the long haul through real tax reforms so that more Americans can secure the economic mobility that an affordable, high-quality education can give,” he said.

To contact the reporter on this story: Richard Rubin in Washington at rrubin12@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net

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