The Cato Institute’s Adam B. Schaeffer has a series of four articles on school choice funding that were published this week in the National Review Online (1, 2, 3, 4). The entire series is worth reading.
The gist of Schaeffer’s series is that tax credits are a far better vehicle for empowering parents with functional and sustainable school choice than are vouchers. I don’t get the idea that Schaeffer is completely opposed to vouchers, but he thinks they are not as good as tax credits.
Tax credits simply let parents keep money they spend on private schooling instead of paying it as taxes. That is, their tax assessment is reduced by some of the amount they pay for their children’s private school tuition. Vouchers, on the other hand, are money that government disburses to parents to help cover the cost of their children’s private school tuition. (In some voucher programs it is paid directly to the school of choice as directed by the parents.)
The big difference between the two programs is that in the case of tax credits, the money never goes through the government. Even school choice opponents agree, says Schaeffer, that tax credits are not technically government money. As voucher proponents in Utah have discovered, it’s difficult to get past the idea that vouchers are a form of government handout.
But Schaeffer argues that avoiding the use of direct government money is just the beginning of the advantages tax credits offer. He notes that tax credits are substantially favored over vouchers in pretty much every study. He writes, “Even current and former public school employees support education tax credits by a margin of nearly two to one.”
Popularity aside, Schaeffer argues that tax credits (when businesses are permitted to participate by creating scholarship funds) end up spawning robust, self-sustaining institutions that support and help expand the program. “Tax credits establish a self-implementing form of school choice that relies on the private-sector alone,” he says. “Voucher programs,” on the other hand, “do not create these institutions, and thereby their beneficiaries have difficulty overcoming collective action barriers to organize and defend school choice.”
After reading Schaeffer’s articles, it would seem that proponents of school choice should be ready to dump vouchers and jump on the tax credit bandwagon. But there seems to be a significant issue that education tax credits fail to address. What about those that are less well-off?
One of the major complaints by school choice opponents is that programs that help parents pay for private school tuition help mainly wealthier families that can already afford to send their kids to private schools. Those that can’t afford to send their kids to private schools without the programs, they argue, would still be unable to afford to send their kids to private schools with the programs.
While allowing businesses to offer scholarships probably answers some of this, tax credits seem to favor those that pay more taxes, which happens to be those that make more money. A tax credit of up to $4000, for example, wouldn’t be very helpful in paying for private schooling if your total state tax assessment (and therefore your total credit) amounts to $400. And if you’ve got three or four kids, the disparity only gets worse. Schaeffer seems to completely ignore this problem.
Utah’s voucher law would pay a maximum of $3000/child and a minimum of $500/child. But this is on a means tested sliding scale, with the poorer folk getting the most and the richer folk getting the least. Opponents argue that even a $3000 voucher wouldn’t be enough to help poorer people afford private school tuition, so only the rich will take advantage of it. That’s poppycock. The largest private school in my area (a Catholic school) draws a significant number of its students from families that earn below median income. And yet these people somehow make enough sacrifices to send their kids to private school. Think of how many more families that are less well-off could make it work with the voucher system.
My point is that education tax credits would benefit the rich far more than the poor, and that this is exactly the inverse of how Utah’s voucher system is designed to function. I think that most Utahns that favor school choice favor a progressive system that provides more aid to those that need more aid. I realize that this goes against pure libertarian philosophy, but I also believe it to be a political reality.
Those that oppose any kind of taxpayer funded school choice as a matter of principle will completely disagree with me. (And don’t give me any of that guff about parents having plenty of choice within the present public system.) But it seems that a combination of education tax credits and vouchers could be designed to create a school choice program that would maximize opportunities for the greatest number and broadest spectrum of school children. I see no reason that both vehicles can’t be pursued or why one of them should be excluded. The idea is to provide the highest quality of education for each student.