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Demand for alternatives to state-run schoolshas swelled over the past decade, as witnessed byrising poll numbers favoring increased choiceand by the creation of new charter schools,voucher programs, education tax credits, home-schools, and private scholarship funds. Despitemounting demand, however, such alternativesreach relatively few students. Charters andvouchers, for instance, serve only 2 percent of school children nationwide.Government policy, for the most part, contin-ues to impede the expansion of independentschools. Most families who seek independent edu-cation must pay tuition for an independentschool while simultaneously paying taxes for stateschools they do not use. The universal educationcredit is one way to ease the financial discrimina-tion against families seeking independent educa-tions for their children.Like traditional education tax credits, theuniversal education credit lets parents deduct aportion of schooling costs from their state taxbill. Unlike traditional credits, however, the uni-versal education credit has been uniquelydesigned to assist families with limited or no taxliability. Under this plan, any parent, individualtaxpayer, or business would receive a dollar-for-dollar reduction in tax liability for money spenton tuition. The credit can be taken for up to one-half of the per pupil expenditure in the publicschool system, and taxpayers may take the creditfor more than one child as long as the combina-tion of credits does not exceed their tax liability.A large company, for example, could pay $1,000tuition for each of 1,000 students and receive a$1 million tax credit provided the credit did notexceed the company’s tax liability.Why would an individual or business pay fora child’s education? Given the choice of payingtaxes for general services or directing some of those taxes to scholarships, many people willprefer to assist students. That has been the casein Arizona, where a new tax credit has raisedroughly $14 million for scholarships.Among other benefits, the universal educa-tion credit can (1) give parents more control overtheir children’s educations by empowering theparents to select and pay for their children’sschools; (2) reduce the financial penalty borne byparents seeking independent schools for theirchildren; (3) generate competition amongschools, spurring improvements in both inde-pendent and government schools; and (4) raisescholarship funds for students in need.
 Reclaiming Our Schools
 Increasing Parental Control of Educationthrough the Universal Education Credit 
by Darcy Ann Olsen and Matthew J. Brouillette
_____________________________________________________________________________________________________
 Darcy Ann Olsen is director of education and child policy at the Cato Institute, and Matthew J. Brouillette is direc-tor of education policy at the Mackinac Center for Public Policy, an independent, nonprofit research and educa-tional institute in Midland, Michigan.
Executive Summary
No. 388December 6, 2000
 
Introduction
If educational freedom were placed on acontinuum, at one end of the spectrumwould be government monopoly over theprovision, regulation, content, and fundingof education; at the other end would be theseparation of school and state, where educa-tors and schools cater to parents and chil-dren as customers in an open market for edu-cation services.As legislatures permit more options andalternatives to government schools, familieshave more freedom to control their children’seducation. A wealth of polling data over timeand the tremendous increase in alternativeschooling indicate that the American publicwould like to move further in that direction.
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Although many states have been takingsteps to enhance educational freedom, nostate has yet relinquished its monopoly overkindergarten through 12th-grade education.None of the current choice programs, includ-ing intradistrict and interdistrict plans, char-ter schools, government-funded vouchers, andtraditional education tax credits, separatesschools fully from state control. For instance,public school choice, which includes intradis-trict and interdistrict plans and charterschools, operates strictly within the confinesof the government monopoly. Education taxcredits and government-funded vouchers,which make possible choice between govern-ment and independent schools, give parents agreater choice of schools, yet the state largelyretains control over education financing andservices. And none of those choice programs isavailable to all families.A better educational choice plan would beone that is universally available and puts par-ents in charge of paying for and selectingeducation services for their children. At thesame time, such a plan would end the state’scurrent financial discrimination against fam-ilies who choose independent schools. Oneway that can be accomplished is through auniversal education credit.
2
Under a universal education credit plan,any taxpayer (including parents, individualtaxpayers, and businesses) would receive adollar-for-dollar reduction in tax liability formoney spent on tuition. The credit can betaken for up to one-half of the per pupilexpenditure in the public school system, andtaxpayers may take the credit for more thanone child as long as the combination of cred-its does not exceed their tax liability. Forexample, relatives of a student could pay thatstudent’s tuition and receive a proportional
2
Although manystates have beentaking steps toenhance educa-tional freedom,no state has yetrelinquished itsmonopoly overK–12 education.
Figure 1Continuum of Educational Freedom
 
credit against their tax liability. Similarly, abusiness could establish scholarships for sev-eral students and receive a credit against itsapplicable tax liability.Consider how the universal educationcredit would have helped the Pettipas familyof Michigan.
3
Roger and Kay Pettipas wantedto enroll their son Rory in a gifted and tal-ented program run by a government schoolin a neighboring district—their assignedschool simply didn’t have the facilities tochallenge Rory, who is particularly bright.However, the school board refused to allowpublic funds to follow Rory to a differentschool. For Rory to attend the neighboringpublic school, the Pettipases had to come upwith $1,800 for tuition. In the end, privatedonors helped the family so Rory couldattend the school. If the universal educationcredit had been available, Rory’s parentscould have taken an $1,800 credit againsttheir state income tax liability and easily sentRory to the school of their choice.
4
This analysis explains how the universaleducation credit differs from other education-al choice reforms, including vouchers; showshow the credit works with real families;explains how state legislators can tailor thecredit; and discusses some of the concerns andthe promises surrounding universal credits.Polls conducted by Phi Delta Kappa/Gallup,the Polling Company/Global Strategy Group,and the
 Detroit Free Press
 /Ferris State Univer-sity show that 2 of 3 voters favor education taxcredits.
5
State legislators should meet parents’demands for more educational freedombyadopting universal education credits.
Public School Choice
Public school choice lets parents choosethe public school their child will attend.Traditionally, the state has assigned childrento a particular school on the basis of wherethey live. Public school choice, whichincludes intradistrict choice, interdistrictchoice, and charter schools, is the beginningof a breaking away from the assignment sys-tem. Most states have passed legislation thatpermits some form of public school choice.With intradistrict choice, school assign-ment is not restricted to a particular schoolwithin the school district in which a childresides. Instead, families may choose fromamong all public schools in the district.Some districts have always allowed intradis-trict choice, while others have strictlyadhered to the school assignment zones.Interdistrict choice typically allows fami-lies to send their children to any publicschool in the state, or a region therein, solong as (1) the receiving district agrees toaccept nonresident students
6
and (2) thereceiving district’s schools have space avail-able. Thirty-two states have voluntary ormandatory interdistrict choice.
7
Charter schools are a new kind of publicschool that have been aptly described as gov-ernment schools “operating in a private schoolenvironment.” Like regular public schools,charter schools are taxpayer financed and can-not be selective in their admissions policies.Charter schools, however, operate moreautonomously than do regular public schools;typically, charter schools are free of directadministrative control by the government andare subject to fewer regulations. This meansthey have more discretion in choosing the con-tent, curriculum, hours of operation, and staff than do typical public schools. In addition, theamount of government funding charterschools receive is based on the number of stu-dents they attract. If a school does not attractstudents, it does not receive funding.Minnesota passed the nation’s first charterschool legislation in 1991; by 2000, 36 statesand the District of Columbia had adoptedcharter school laws.
8
Roughly 2 percent of pub-lic schools are now charter schools, and theyserve approximately 1 percent of all students.
9
As Figure 1 shows, interdistrict and intradis-trict choice and charter schools are small movestoward greater educational freedom. All threeplans deserve praise for stepping away from thetraditional, rigid assignment system—givingparents the ability to choose from a pool of gov-ernment schools is an improvement over no
3
Public schoolchoice operateswithin thegovernmentmonopoly anddoes little toempower parentsor bring about acompetitive mar-ketplace foreducationservices.
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