middle income families. Parents today find themselves in a tight spot when they have to spend $1,500 to $2,000 or even more per year for their child's college education. The $600 tax deduction for a dependent child to which they are entitled is pitifully below the real costs of maintaining a child in college. Thus, many capable and worthy students who should continue their education are deprived of this opportunity.

Let me give you an example with which I am personally acquainted. My administrative assistant has a boy of 17, who is graduating from high school next June. The boy is president of his class, ranks in the upper third of the graduating class of some 400 students, he is president of the dramatic club, a member of the debating club, the school band, the military cadets, the radio workshop, the student council, and other school activities. His first desire was to enter Cornell University, but upon checking it was learned that enrollment at Cornell's Arts and Science School would cost about $2,000, including room and board. By enrolling in a school in the District of Columbia, where the boy would live and eat at home, the cost for tuition, books, fees, and so forth would be about $1,000. But even this expense is being weighed, since there are two younger children and an aged mother who lives with the family. A tax deduction for college expenses, such as indicated in my bill, would do the trick. At the present time, the boy's continued education is in the doubtful stage.

The loss in such instances is not merely that of the individual concerned or his family. When multiplied in the thousands and tens of thousands it constitutes a loss for the whole Nation-a terrific loss of brainpower. For this reason, for our own self-interest, we must adopt a more realistic approach to this problem. A deduction on college expenses up to $1,000 is a step in the right direction.

It may be asked: How much of a tax saving would this proposal mean for parents, and how much of a loss in revenue would the Government suffer? I can only make a rough estimate. The number of college students in the country is about 1,900,000. Taking into account expenses for tuition, room, board and other costs, the total loss in revenue to the Government would be around $200-250 million annually. Parents granted this deduction would have about $100150 annually, which means they would be helped to the extent of about $500-600 over the 4-year period when their child attends college. This may not be a huge sum, but it would be helpful and encouraging to many parents and prospective college students.

Let me point out another factor to this committee. A taxpayer is allowed a deduction for contributions made to educational institutions. In that case, I ask: If the taxpayer can deduct such contributions for the education of others, not known to him, why should he not be entitled to a deduction for his contribution toward the education of his own children? I believe it makes sense.

And, finally, unless tax deductions are permitted to ease the burden of the costs of higher education, our colleges and universities will become more and more dependent on Federal and State subsidies, grants through scholarships, and so forth. While I regard such subsidies and grants as necessary to some extent, I believe grave damage will be done to our system of education in the future if our institu

tions of higher learning become totally dependent on the support of the Government, and the role of the individual is completely overshadowed or ignored.

Mr. Chairman and members of this committee, I feel that your committee is now in a position to render a great service to the American people, to the American system of education, and to the future security of our Nation, by the adoption of the proposal to allow tax deductions for college expenses along the lines indicated in my bill. (H. R. 3601 is as follows:)

[H. R. 3601, 85th Cong., 1st sess.]

A BILL To increase from $600 to $800 the personal income tax exemptions of a taxpayer (including the exemptions for a spouse, the exemption for a dependent, and the additional exemption for old age or blindness); and to provide a deduction for certain expenses paid by a taxpayer for the education of his children

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That (a) the following provisions of the Internal Revenue Code of 1954 are amended by striking out "$600" wherever appearing therein and inserting in lieu thereof "$800":

(1) Section 151 (relating to allowance of deductions for personal exemptions);

(2) Section 642 (b) (relating to allowance of deductions for estates); (3) Paragraphs (1) and (3) of section 6012 (a) (relating to persons required to make returns of tax);

(4) Section 6013 (b) (3) (A) (relating to assessment and collection in the case of certain returns of husband and wife); and

(5) Section 6015 (a) (2) (A) (relating to declaration of estimated income tax by individuals).

(b) The following provisions of the Internal Revenue Code of 1954 are amended by striking out "$1,200" wherever appearing therein and inserting in lieu thereof "$1,600":

(1) Section 6012 (a) (1) (relating to persons required to make returns of tax); and

(2) Section 6013 (b) (3) (A) (relating to assessment and collection in the case of certain returns of husband and wife).

SEC. 2. (a) Section 3 of the Internal Revenue Code of 1954 (relating to optional tax if adjusted gross income is less than $5,000) is amended by striking out "who has elected for such year to pay the tax imposed by this section, the tax shown in the following table:" and inserting in lieu thereof "who has elected for such year to pay the tax imposed by this section

"(1) In the case of a taxable year beginning after December 31, 1956, the tax shown in a table which shall be prescribed by the Secretary or his delegate. The table prescribed under this paragraph shall correspond in form to the table in paragraph (2) and shall provide for amounts of tax in the various adjusted gross income brackets approximately equal to the amounts which would be determined under section 1 if the taxable income were computed by taking the standard deduction.

"(2) In the case of a taxable year beginning before January 1, 1957, the tax shown in the following table:".

(b) Section 4 (a) of the Internal Revenue Code of 1954 (relating to rules for optional tax) is amended by inserting after "the table in section 3" the following: "and the table prescribed under section 3".

SEC. 3. (a) Section 3402 (b) (1) of the Internal Revenue Code of 1954 (relating to percentage method of withholding income tax at sources) is amended by striking out the table and insering in lieu thereof the following:

(b) So much of paragraph (1) of section 3402 (c) of the Internal Revenue Code of 1954 (relating to wage bracket withholding) as precedes the first table in such paragraph is amended to read as follows:

"(1) (A) At the election of the employer with respect to any employee, the employer shall deduct and withhold upon the wages paid to such employee after December 31, 1957, a tax determined in accordance with the tables prescribed by the Secretary or his delegate, which shall be in lieu of the tax required to be deducted and withheld under subsection (a). The tables prescribed under this subparagraph shall correspond in form to the wage bracket withholding tables in subparagraph (B) and shall provide for amounts of tax in the various wage brackets approximately equal to the amounts which would be determined if the deductions were made under subsection (a).

"(B) At the election of the employer with respect to any employee, the employer shall deduct and withhold upon the wages paid to such employee before January 1, 1958, a tax determined in accordance with the following tables, which shall be in lieu of the tax required to be deducted and withheld under subsection (a) :".

SEC. 4. (a) Part VII of subchapter B of chapter 1 of the Internal Revenue Code of 1954 (additional itemized deductions for individuals) is amended by adding at the end thereof the following new sections:

"SEC. 218. EXPENSES FOR EDUCATION OF CHILDREN.

"Amounts paid by the taxpayer during his taxable year for the education of an individual, but only

"(1) if such individual is the son, daughter, stepson, or stepdaughter of the taxpayer and the taxpayer is entitled to an exemption for such year under section 151 with respect to such individual;

"(2) if such individual is pursuing a bona fide course of education beyond the high-school level at a school, college, university, or other educational institution; and

"(3) to the extent that the amounts so paid during the taxable year do not exceed $1,000 with respect to such individual.

Subsistence expenses shall be allowed under this section with respect to any individual only while such individual is attending an educational institution away from home. For the purposes of paragraph (1) of this section, a legally adopted child of a person shall be considered a child of such person by blood." (b) The table of sections for such part VII is amended by adding at the end thereof the following:

"Sec. 218. Expenses for education of children."

SEC. 5. The amendments made by the first two sections of this Act, and by section 4 of this Act, shall apply only with respect to taxable years beginning after December 31, 1956. The amendments made by section 3 of this Act shall apply only with respect to wages paid after December 31, 1957.

Mr. ANFUSO. My bill, H. R. 4737, which I introduced just about a year ago, seeks to amend the Internal Revenue Code of 1954 by providing that interest received by individuals from United States savings bonds shall be excluded from their gross income and, therefore, not be taxable.

20675-58-pt. 8—54

For some time now the United States Treasury Department has been reporting that the American people have been redeeming more Gov ernment defense and savings bonds than are being purchased. I have some official figures here which I obtained from the Treasury Department which indicate the trend:

Thus, while in the year 1956 the Treasury sold $211 million more bonds than were redeemed, we find that in the year 1957 the American public has cashed nearly a billion dollars worth of bonds ($962 million, to be exact) over what has been sold in the same year.

While I do not pretend to know all the reasons for this situation, I believe that the low interest rates paid on these bonds had something to do with it. In other words, it is very likely that many people, particularly larger investors, cashed in their bonds and invested the money elsewhere where they were able to get 312, 4, or even more percent on their investment instead of the 34 percent they get on United States savings bonds.

Another likelihood for the large redemptions may be the steadily rising cost of living or unemployment which necessitates using family savings to meet essential needs.

Incidentally, it is worth noticing that of the $5,469,000,000 worth of bonds redeemed in 1957 the interest accruing on these bonds amounted to $772 million. Since the $772 million is considered gross income and, therefore, taxable, the net value of the bond was actually less.

Millions of Americans are holding series E and H bonds worth a total of $41,578,000,000. This is an important part of our Nation's financial structure, as well as a sizable savings nest for millions of families. Many of them are now wondering what to do about their bonds. Inflation has wiped out much of the value of the interest earned on the bonds, while taxes on the interest takes the rest. This, too, explains why there is a growing trend of redemptions or cash-ins.

If this trend continues, it will mean that the United States Treasury will have to make huge outlays of funds to finance the redemptionsand that may have an adverse effect upon our economy at a most inopportune time. It may help speed the current recession. We must find ways to convince the American public to hold on to these bonds and to purchase new ones as a profitable investment.

I suggest that one of the most attractive ways to achieve this is to make the interest earned on savings bonds tax-exempt. By making the series E and H bonds nontaxable, we would provide such an incentive for people to hold on to their bonds and purchase new bonds. I urge you to approve my bill and in this way help to reverse the current trend and stimulate greater sales of United States savings bonds.

(H. R. 4737 is as follows:)

[H. R. 4737, 85th Cong., 1st sess.]

A BILL To amend the Internal Revenue Code of 1954 to provide that interest received by individuals upon United States savings bonds shall be excluded from gross income

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 103 (b) of the Internal Revenue Code of 1954 (relating to exclusion from gross income of interest on certain governmental obligations) is amended by adding at the end thereof the following new sentence: "Notwithstanding the preceding sentence and notwithstanding the provisions of section 4 (a) of the Public Debt Act of 1941 or of any other law, gross income does not include interest received or accrued by a taxpayer (other than a corporation) upon United States savings bonds issued under section 22 of the Second Liberty Bond Act."

SEC. 2. The amendment made by the first section of this Act shall apply only with respect to taxable years ending after the date of the enactment of this Act. The CHAIRMAN. Our next witness is Mr. James W. Cassedy.

Please come forward, Mr. Cassedy, and identify yourself for the record by giving your name, address, and the capacity in which you appear.

Mr. HERLONG. Mr. Chairman, I wonder if I might have unanimous consent to put an item in the record.

The CHAIRMAN. Mr. Herlong.

Mr. HERLONG. I have here a statement issued by Dr. Oliver C. Carmichael, president of the Converse College, Spartanburg, S. C., in connection with the tuition tax credit plan for colleges. I wonder if I might get permission to put that in the record.

The CHAIRMAN. Without objection, it will be included in the record. (The statement referred to is as follows.)

STATEMENT of Dr. Oliver C. CARMICHAEL, PRESIDENT OF CONVERSE COLLEGE, SPARTANBURG, S. C.

THE TUITION TAX CREDIT PLAN-AN ANSWER TO FEDERAL AID

American colleges and universities, both public and private, face greater challenges than ever before in their history. The era of sputnik makes it imperative for them to render ever-expanding services. And yet, they cannot obtain sufficient revenues to permit even a minimum satisfactory pay scale for the members of their faculties, let alone a pay scale which will attract young people to the teaching profession. To permit further deterioration will intensify the crisis in geometric progression.

Private institutions have been unable to keep pace with the inflationary spiral because of decreased value of endowment income and the inability to adequately increase tuition and fees because to do so would price them out of the market. State colleges and universities have suffered because of the Federal-State tax structure which takes proportionately more and more money from the people for operation of the Federal Government and less and less for State, county, and local activities.

Great strides have been made to increase corporate, individual, and church support for private colleges. State and local governments have levied taxes to increase revenues for the public colleges and universities. However, financial resources continue to be woefully inadequate. Whereas salaries paid in other professions and vocations have kept pace with the rising cost of living, faculty salaries have fallen to a point where the entire educational structure is in danger. Action must be taken to reverse these devastating trends.

The American people sense this crisis in education. They are properly demanding and expecting remedial legislation. On the other hand, there is a deepseated fear of Federal control, the loss of independence by the private and church-related institutions, and a decrease in autonomy of State colleges and universities. The answer to this dilemma is the tuition tax-credit plan, a plan which helps all the people, and its grants proportionately greater tax benefits to those in the low-income brackets than the high. Although such a plan has been presented in many forms, it is one which would permit credit up to a certain amount of the total income tax due by an individual.