Another Advantage of Education Tax Credits

Sara Mead’s latest post over at the Quick and the Ed offers yet another opportunity to point out yet another advantage of tax credits over such alternatives as school vouchers or government monopoly schooling.

Before describing that advantage, though, I can’t resist addressing the logical fallacies at the heart of her post. Mead originally argued that tax credits are public money. When that was proven false, she fell back to the claim that tax credits are equivalent to public money in non-legal respects. That, in turn, was proven false in my last post, which contrasted the programs’ categorically different levels of taxpayer compulsion and linked to an exposition of further differences. Mead nevertheless continues to assert that tax credits are equivalent to government money because, she says, they have the same net effect on state budgets and have “a distorting impact on individual incentives.” This is a hybrid of the fallacy of composition and false analogy. The fact that two things share one or more particular traits in common does not make them equivalent. They may, as in this case they do, differ in other material respects. Mead thus remains mistaken in her persistent belief that tax credits are equivalent to government money.

The real reason that her post is worth responding to, however, has nothing to do with its interesting logical fallacies. Rather, it is because she mentions the “distorting impact” of education tax credits on “individual incentives.” In this premise at least, Mead is correct. Education tax credits do affect both parents’ and taxpayers’ behavior, but they do so less perniciously than is the case with either school vouchers or government schooling.

Under scholarship donation tax credits, taxpayers choose the scholarship granting organization that receives their money. If they are not happy with the quality or efficiency of their current choice, they can redirect their next donation elsewhere. Under vouchers or the status quo, taxpayers dissatisfied with the state system who decided to redirect their tax liability to a private scholarship organization of their choosing would eventually find themselves in jail. Their behavior is thus rather more profoundly circumscribed under government-funded programs.

The incentives for parents who claim personal use tax credits are also superior to those faced by parents under vouchers or the status quo. Under the sort of tax credit policy my colleagues and I advocate, the eligibility criterion for the personal use credit would simply be that parents take financial responsibility for their own children’s education (i.e., that the kids not be enrolled in government schools). They could allocate some of the money they saved for home instructional materials and some for tuition, for instance, weighing the value of each according to their own preferences. This ability to weigh alternative educational expenditures against one another produces an incentive for thrift and parental involvement. Such parental budgetary discretion is impossible under the status quo, and more problematic under vouchers (which tend to be limited exclusively to tuition because of the more intrusive regulatory restrictions usually applied to government subsidy programs).

As for Mead’s conspiracy theory about the “real” reason why my colleagues and I support education tax credits, it’s only worth a brief mention: Education tax credits are the best policy option under current conditions, both legally and practically. If conditions change, and I wake up some morning to find that a state has so drastically cut taxes that such a program would not be viable, I will happily suggest alternatives that would still fulfill the public’s unwavering desire for universal access to a good education. That’s provided I’m not struck by a flying pig on the way to work, of course.