NCPA - National Center for Policy Analysis

Tuition Tax Credits Boost School Choice

December 19, 2001

More options are available to parents seeking educational opportunities for their children through tuition tax credits that allow them to send their children to either public or private schools. A number of state programs are based on the success Arizona has had with its program. The program is relatively simple.

  • Taxpayers who make a voluntary donation to a school tuition organization (STO) receive a matching (dollar-for-dollar) tax credit up to a maximum of $500 -- thus reducing their state tax payments by $500.
  • Parents choose the STO to which they apply for assistance based on the schools the STP serves.
  • Because the STOs set their own parameters, the size of scholarships varies, ranging from about $600 to $3,389 -- with the 2000-2001 school year average at $856.
  • Between 1998 and 2000, the total number of taxpayers making donations to STOs has leaped from 4,247 to 37,368 (see Figure).

Opponents challenged the law as unconstitutional, but the program prevailed because of two characteristics of the enabling law: first that the program doesn't involved the state (taxpayers participate voluntarily) and second that the program offers tax credits for donations to public schools. Similar programs have now been enacted in Pennsylvania and Florida, and are being considered in a number of other states.

Source: Lisa Graham Keegan (Education Leaders Council), "Tuition Tax Credits: A Model for School Choice," Brief Analysis No. 384, December 18, 2001, NCPA.

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