Kathy Kitchen, Editor

Tuition Tax Credits and Vouchers

A tax credit reduces an individual’s tax liability on a dollar for dollar basis. For example, if you owe the federal or state government $3,000, a $1,000 tax credit will require you to pay only $2,000 in taxes. The credit can be refundable or non-refundable. If they are non-refundable, you can only claim the credit up to the amount of your actual tax bill. For example, if you owe $800 in taxes, you could claim a tax credit of only $800 even if the credit is allowable up to $1,000. Refundable credits, however, allow you to claim the total amount of the credit even if your total tax liability was less than that amount.

Tax credits have been used as an alternative to voucher or “scholarship” programs. Proponents of tax credits suggest that the use of credits alleviates concerns related to the church/state separation issue that continues to be raised in opposition to voucher programs. Because a tax credit allows an individual to keep their money and is never collected by the government, it should not be construed as government funding.

School vouchers, which are often referred to as “scholarships” send government funding directly to families rather than states and/or local school districts. Families can then use the voucher to purchase educational services at a public or private school of their choice, thereby defraying all or part of the tuition expense.

These programs have been very controversial, raising constitutional issues related to the separation of church and state, potential regulation of private schools that accept government vouchers, the lack of a competitive market related to education, and the undermining of public schools.

Proponents of the programs state that the program:

• Gives all parents the power and opportunity to choose the school their child will attend rather than just those parents who can afford to move to an area to have their child attend a particular school or who can afford to enroll their child in a private school.

• Uses the competitive market to drive service quality; either schools show results and are accountable for student achievement or will eventually close.

• Encourages parental involvement and high expectations as parents select the option they deem most appropriate for their child.

• Serves all students, not just the “cream of the crop”; in Milwaukee eligibility is limited to families with incomes at or below 175% of the federal poverty level and in Cleveland students from low-income families received larger scholarships.

• Raises academic performance for students; by the end of the 4th year in Milwaukee, students were performing better in reading and math than students in the Cleveland Scholarship Program.

Opponents cite:

• Voucher programs and tax credits do nothing for families who cannot come up with the rest of the money to cover tuition costs at private schools.

• Private schools are allowed to choose their students and can reject those with discipline problems, low academic achievement or other factors.

• When offered the opportunity, many vote against such programs; in 1998 voters in Colorado rejected a constitutional amendment that would have allowed tuition tax credits.

• While some students show student improvement, there is little empirical evidence that these programs improve the quality of education for those that need it most.

Both sides of the voucher debate seem to agree that government-supported vouchers, and even tax credits to some extent, have the potential for government interference in many areas:

• Admission policies – to ensure access to all students, regulations could require the acceptance of disabled and low-income students,

• Accountability – to ensure students are receiving a “high quality” education, regulations governing content (standards) could be enforced, and

• Supplemental programs – to ensure success, schools might be required to provide supplemental services, whether for the disabled or at-risk student, thus raising the cost of the programs.

Many contend that through government interference, spurned by political pressure, the problems facing the public schools in the nation will be transferred to the private sector as well.

Supporters of these programs contend that vouchers or tax credits would enhance the education for all by providing competition in the field.

• “For profit” – companies now organized to provide education for students in grades kindergarten through twelve designed to make a profit.

• Students may not always secure their first choice; however, companies will expand to the extent possible rather than turning away students.

• Likened to other for-profit commodities such as restaurants and department stores, companies create more opportunities to serve the demand.

• Private non-profit schools – operated by entities such as the Catholic Diocese are often less responsive than their for-profit counterparts.

• Many rejections are for lack of space which proponents claim would be lessened with additional resources provided by vouchers.

• Attending the students’ second or third choice would still provide more choice than attending the assigned school in the public system.

• Public school – facing pressure from private for-profit and/or non-profit schools would force the public school system to “rise to the occasion” and provide better services to all students.

Opponents claim quite the opposite when discussing the open market place related to K-12 education:

• Private schools are still allowed to “discriminate” by selective admission policies. By hand picking their students, they can eliminate those who are at-risk or disabled. They then can claim high success rates among their students.

• Voucher programs and tax credits often do not provide sufficient resources to allow poor families to choose the best private programs. For a family that is at or below the poverty level, a $2,000 voucher does not allow a student to attend a $10,000 program. Schools will raise tuition rates according to the voucher to continue to eliminate low-income families.

• The government may begin to regulate the admission practices of schools accepting vouchers to ensure access to all; thus leading to potential regulation in many areas.

• Government regulations of non-public programs would then begin to limit the competitive market that was originally defined.

One of the largest criticisms of government supported vouchers and tax credits is that the public schools, left with the mandate to educate all who come, will be damaged. Critics contend that one of the greatest principles of our nation is the public mandate to educate all people.

• Public schools will be left with the most difficult and expensive children to educate.

• Fewer dollars will be available as more and more funds are required to support the voucher or tax credit program.

• Middle class families that provide the highest level of support to the public school system will be removed, thus the support for educational reform and excellence will be lost and the gap between the “haves” and the “have nots” will be widened.

One thing is certain. This debate will continue for the foreseeable future. More attention will need to be focused on student outcomes through researched-based evaluation. Once the court battles are over, parents will demand to know if programs of this nature really mean anything for their children.

It is important to note that the United States Supreme Court has not yet heard a case on vouchers. However, the Supreme Court of the state of Wisconsin ruled in 1998 that the Milwaukee Parental School Choice Program did not violate either the state or federal constitution. The verdict was appealed to the U. S. Supreme Court but the justices voted 8 to 1 not to hear the appeal. The Arizona Supreme Court ruled in a recent decision that the state’s education tax credit program did not violate the separation of church and state because it allowed an individual to keep more of the money he earned; therefore, it did not become a government subsidy.

Proponents claim that the First Amendment provides freedom of religion, not freedom from religion. Parents can choose where their child attends school; the government does not force any religious choice on them. Clint Bolick, vice president and litigation director at the Institute for Justice in Washington, D.C., states the following:

Contemporary school choice programs do not propose subsidizing religious schools, but merely include such schools within the range of educational options made available to a neutrally defined category of beneficiaries (usually economically disadvantaged families). No public funds are transmitted to religious schools except by the independent decisions of third parties. As the U. S. Supreme Court repeatedly has affirmed, such “attenuated financial benefits, ultimately controlled by the private choices of individuals . . . are simply not within the contemplation of the Establishment Clause’s broad prohibition.”

Opponents claim that programs designed to channel money into schools that promote religious training fly in the face of the constitutional mandate of separation of church and state. The Court has struck down education programs that allow parents of parochial school students to recover a portion of their educational expenses from the state. They have also ruled as unconstitutional any government aid that accrues to a parochial schools in a way that might assist those schools in their sectarian missions. Federal appeals courts have even prohibited the government from lending instructional materials to parochial schools.

The Constitution, however, does leave room for programs that result in indirect benefits to religious institutions. The Court has not ruled as unconstitutional the use of benefits from the G.I. bill at sectarian institutions.

Vermont, Maine, Cleveland, Ohio and Milwaukee, Wisconsin currently have programs in place that allow parents to choose the public or private school their children will attend. The oldest of these is in Vermont where there are towns too small to support a public school. The state will pay the tuition cost for children to attend any public or non-sectarian private school. The state has gone so far as to pay tuition to schools outside of Vermont. A review of the system is available at http://www.state.vt.us/educ/choice1.htm.

Maine’s system, like the Vermont plan, has been in effect for many years and grew as the result of towns not being able to support public high schools. Again, the child’s tuition is paid at any school of the parent’s choosing, both in-state and out-of-state with the exception of religiously affiliated schools in areas that have a publicly supported high school.

In Cleveland, scholarships are provided to more than 3,000 at-risk students to attend private schools of their parent’s choosing, both secular and religious, in grades kindergarten through four. The scholarships may not exceed $2,500 or the amount of tuition. Additional information on this program is available at www.dpi.state.wi.us/dpi/dfm/sms/psctoc.html. The amount of the scholarship varies based upon the amount of tuition and family income. A similar program is underway in Milwaukee, where approximately 1,650 economically disadvantaged students are using choice scholarships to attend participating non-sectarian schools. Florida’s program, which allows students who have attended a “failing school” two out of four years to attend another public, private, or religious school was recently struck down by a state court.

Arizona, Illinois, Iowa, and Minnesota each have a tax credit program in place. These programs include private school tuition costs. A complete state by state review of school choice programs can be found at www.heritage.org/schools/99 with links to the various state departments of education, institutions of higher education, and parent organizations.

The focus on tuition tax credits and vouchers has led to a plethora of other choice programs. Many states have adopted charter school laws, although some are much stronger than others. In addition, public school systems continue to offer a wide variety of options to their students. From magnet programs to specialty centers, local boards are providing more choices to their students in response to demand from the communities that they serve.

The public schools are charged with the responsibility to educate all students. They are by their very nature free and available to all. If the public schools are, as many say, failing to accomplish their mission, then more attention should be placed on fixing the problems. Merely taking away many of the best students will not solve the problem for those who remain.

As William C. Bosher, Jr. stated in a recent article, if families choose not to use the public library, do we give them public funds to subscribe to America On-line? If they choose not to take advantage of our public parks, do we subsidize their membership to a country club?

Most agree that the public schools can use improvement. Much is being done to set high standards, assess students against those standards, provide opportunities for all students to succeed and hold schools accountable for their results. We should continue on this course to ensure a quality education for all students.

Click here for summary of recent Virginia Legislative history of “Tuition Tax Credits and Vouchers.”

Center for Education Reform

The Heritage Foundation

School Choices

Anti-Defamation League

School Business Affairs, Association of School Business Officials International, April 2000, “School Choice/Market Alternatives”

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