NCPA - National Center for Policy Analysis

Tax Credits: Another Route to School Choice

September 6, 2001

Six states have passed some type of education tax credit and others seem poised to follow. These allow parents or corporations to take tax deductions for payments to either private schools or supplemental programs in public schools.

Minnesota passed the nation's first tax credit and saw it upheld by the Supreme Court in 1983.

  • The Minnesota law now provides a credit of up to $2,500 a year for families to spend on any educational-related expense -- with low-income families that don't pay income taxes getting a refundable credit of up to $2,300 a year.
  • Illinois and Iowa have similar, but smaller, credits.
  • New tax-credit laws in Florida and Pennsylvania allow corporations to take a credit for donations to non-profit scholarship funds.
  • And in Arizona, taxpayers can take a credit for donations to scholarship programs that help low-income children attend schools of their choice -- although the maximum $500 a year can't be used by parents for their own children or by businesses.

More than 19,000 scholarships have been awarded under the Arizona program -- more than 80 percent based on financial need.

Supporters of school choice warn that if choice opponents continue to block vouchers at every turn, they shouldn't be surprised if the pent-up demand for reform comes in through the back door of tax credits.

Source: Editorial, "Extra Credit," Wall Street Journal, September 5, 2001.


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