Illustrates why education providers, inaddition to parents and children, needto be free of burdensome regulations;
Summarizes the model tax credit legis-lation presented in Appendix B inaccessible, layman’s terms, and givesexamples in Appendix A of how itwould work in the real world; and
Presents model tax credit legislationthat provides for educational freedomby funding choice through personaluse and donation tax credits on stateindividual and corporate income taxes,state sales taxes, and property taxes.
Why Tax Credits ArePreferable to Vouchers
Supporters of educational freedom, per-haps not surprisingly, sometimes disagreeabout what constitutes the ideal school choicepolicy. The late Milton Friedman, amongmany others, viewed his original proposal for a voucher system as the best practical reform forthe public education system. Other supportersof educational freedom prefer education taxcredits. Most school choice supporters have lit-tle or no preference between these alternatives.
They see any expansion of public-private edu-cational choice as a good thing. However, while vouchers and tax credits are both improve-ments on the status quo, each has particularstrengths and weaknesses.This section explains why education taxcredits are preferable to vouchers for bothpractical and political reasons. This does notmean the current system is preferable to a voucher system—quite the contrary. Butschool choice reformers face a tremendously difficult task, which can be eased by focusingon the policy with the greatest advantages.
This discussion considers personal use anddonation tax credits as two sides of the samecoin; personal use credits are helpful to higher-income taxpayers with children who can usethem to offset their tax liability, while donationcredits create a pool of funds that lower-income families can access for the education of their children. Together, these personal useand donation tax credits can create the mostsuccessful system of educational freedom cur-rently possible. This discussion focuses on theinherent advantages of tax credits relative to vouchers, not on the relative limitations oradvantages of existing voucher and tax creditprograms. All existing voucher and tax creditprograms are seriously compromised and lim-ited. Vouchers and tax credits are, however, very different mechanisms for delivering schoolchoice and it is those differences that will beanalyzed below. The analysis reveals that taxcredits are inherently preferable to vouchersacross at least five dimensions.
One of the most important advantages taxcredits have over vouchers is a legal distinctionof great consequence. Courts do not considertax credits to be government money, whereas vouchers are considered government money.
This legal issue has a number of political rami-fications. Political concerns, however, are diffi-cult to separate from purely legal ones becausethe interpretation of the law is often driven by the political dispositions of judges and thelegal profession as a whole.
The fact that the courts and the public gen-erally regard vouchers as government fundsand tax credits as private funds has a numberof important consequences. It means that taxcredits are less likely to be challenged in court,less likely to be overturned by a court, less like-ly to come with burdensome regulations, andless likely to accumulate regulations over time.The most important implication is this: taxcredits are a viable option in many states whereeffective voucher programs are likely to bestruck down on state constitutional grounds.State courts have repeatedly ruled that vouchers are government funds.
The dis-bursement of government funds to religiousschools is expressly prohibited in most statesby turn-of-the-century anti-Catholic “Blaine”amendments that were meant to keep publicfunding in Protestant-influenced publicschools and away from Catholic parochialschools. Many states also have what are called
Tax credits areless likely to bechallenged incourt, less likely to be overturnedby a court, lesslikely to comewith burdensomeregulations, andless likely toaccumulateregulations overtime.