Coverdell Education IRA Proposal

Senators Paul Coverdell (R-GA) and Robert Torricelli (D-NJ) are proceeding with proposed “Education IRA Account” proposal in the coming weeks in the context of the final federal budget negotiations.  As the attached summary indicates, this proposal would permit parents to invest up to 2000 post-tax dollars per child, per year in a separate IRA-type account whose accrued interest would not be taxed.  Funds could be withdrawn from the account to cover a wide array of education related expenses (including tuition) associated with public, private or parochial education.  While President Clinton has proposed this kind of account for college education expenses, Coverdell-Torricelli extend the concept to K-12 education.

The benefits of this proposal to the Orthodox community, broader Jewish community and American society at large are obvious.  The Education IRA accounts will provide parents of all children the opportunity to invest and earn additional funds that can be used toward providing for their children’s educational needs.

This proposal in particular should enjoy support (one hopes) in the broader Jewish community; even among those that oppose vouchers for the following reasons – it is a world apart from vouchers, it takes no funds from the public school system as it is contended vouchers do, and it is clearly constitutional.

The Education IRAs are a world apart from vouchers.  While vouchers “take” education dollars from the government treasury and empower parents, as opposed to government employees, to determine how they are allocated,  the Education IRA proposal does no more than exempt an instance of  “double taxation.”   Dollars invested in the accounts are already taxed initially (through income tax), it is only the interest accrued upon them that is made tax exempt.  To suggest that this is a improper “voucher” that aids parochial education is to suggest that any money the government decides not to tax and is donated by a parent to a religious entity is a “voucher” and unconstitutional.  By this logic, the money that a homeowner “saves” by having his mortgage interest deduction may not be used towards the parochial tuition of his children.

This explanation also clearly shows that it cannot be contended that these funds are being “taken” from the education budget either, since the government does not have the money in the first place absent this taxation.

The Coverdell-Torricelli proposal is also clearly constitutional under the U.S. Constitution.  In Mueller v. Allen, 463 U.S. 388 (1983), the Supreme Court held that a Minnesota statute that permitted parents to deduct expenses incurred providing tuition, textbooks, and transportation for their children attending elementary or secondary school – including parochial schools – to be valid under the Establishment Clause.  The Court concluded that the deduction did not have the primary effect of advancing the sectarian aims of non-public schools since it was available to all parents and provided aid to parochial schools only as a result of the decisions made by individual parents.  This type of rationale – that the Establishment Clause is not violated when government programs or funds benefit religion when such a benefit results from the decisions of private citizens who obtain the benefit on the basis of religion-neutral criteria – was again asserted to the Court in this term’s Agostini v. Felton case.

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