The Tax Credits Program for School Choice

Studies | Education

No. 213
Sunday, March 01, 1998
by Linda Morrison


Advantages over Other School Choice Plans

Tax credits could deliver many of the benefits offered by other kinds of school choice, enabling parents to choose schools with the quality and values they prefer and saving taxpayers money. Tax credits have additional political, legal and administrative advantages.

Advantages over Vouchers. Some critics say that giving "government money" (vouchers) to private and religious schools is wrong. A related criticism is that it is unconstitutional. Although opponents of educational freedom are sure to take any reform to court, tax credits have overcome First Amendment church-state objections. The original Minnesota law withstood a court challenge in 1983.11 In holding that the statute did not violate the First Amendment's establishment clause, even though it primarily benefited religious schools, Chief Justice William Rehnquist wrote for the majority:12

Finally, private education institutions, and parents paying for their children to attend these schools, make special contributions to the areas in which they operate. Parochial schools, quite apart from their sectarian purpose, have provided an education alternative for millions of young Americans; they often afford wholesome competition with our public schools; and in some states they relieve substantially the tax burden incident to the operation of public schools [emphasis added]. If parents of children in private schools choose to take especial advantage of the relief provided by [the statute], it is no doubt due to the fact that they bear a particularly great financial burden in educating their children.More fundamentally, whatever unequal effect may be attributed to the statutory classification can fairly be regarded as a rough return for the benefits, discussed above, provided to the State and all taxpayers by parents sending their children to parochial schools.

"There is no reason a tax credit should be considered government aid to education."

There is no reason a tax credit for nongovernment school tuition should be considered government aid to education. Americans routinely lower their federal income taxes by deducting charitable contributions to religious organizations. No one regards that provision as government aid to religion. [See the sidebar, "Ensuring Constitutionality."]

Some advocates fear that government control of nongovernment schools through regulations may come with vouchers. Any time government passes out checks, they say, it adds a bureaucracy. Even with statutes to prevent new interference, there is cause for concern. The concern is minimized with tax credits, since the relationship between the government and students in nongovernment schools would not change and people would clearly be spending their own money.

Advantages over Charter Schools. Legislating tax credits would be faster and more efficient than building charter schools. Years pass while lengthy, complicated and restrictive charter school legislation is hammered out and new schools are approved. With tax credits, educators, parents, nonprofits, religious organizations and businesses could set up new schools the day after a state approved the program. The stimulus of the tax credit alone would increase the demand for nongovernment schools.

Advantages over Public School Choice. Public school choice does not give parents real choice; it offers only a choice of schools run by the same bureaucratic monopoly. It does not address the wishes of parents who would like their children to attend schools that embody their values. It does nothing to control education costs for taxpayers. Tax credits would do all those things.

Advantages over Contracting Out. Although contracting out educational services by the local school district can have some benefits -- reduced costs, increased quality, better accountability -- a third-party bureaucracy still purchases the services. Parents have little control. The tax credits program would increase their control significantly.

"Tax credits offer better accountability and less politics."

Other Advantages. Tax credits offer two other advantages: better accountability and less politics. An important administrative problem for charter schools or contracting out is accountability. Who ensures that the government's money is well spent and that children get an education that satisfies their parents? However localized the governing bodies are, charter school and contracting-out plans grant the greatest measure of control to a third party -- not to parents. Decisions are likely to be political, not educational, cost-efficient or value-rich.

The best mechanism for accountability is the marketplace, monitored and controlled by consumers acting in their own self-interest. Parents participating in the tax credits program would exercise consumer power, choosing the best education available for their children.

Tax credits would blunt many of the political questions about school choice, such as:

  • How would we determine which students get voucher money?
  • Should government voucher money be used in schools that teach witchcraft or racial and ethnic hatred?
  • How would we decide who can set up a charter school and who cannot?

"The quality of goods and services is highest when consumers are free to choose and entrepreneurs are free to provide."

Under the tax credits program, these arguments would become irrelevant because the money would not be the government's. The program would not attempt to control any child's education. It would let parents send their children to nongovernment schools, a constitutional right set forth by the U.S. Supreme Court in 1927. It would allow taxpayers who relieve a government school of the task of educating a child to enjoy more control over their own money.


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