School Choice Leadership in New Hampshire

Yesterday, the New Hampshire Senate passed a path-breaking education tax credit bill that includes home school expenses and allows the program to grow 25 percent each year if it is successful. It is income-limited, but scholarship organizations can use 20 percent of their funds for children who would otherwise not qualify, giving flexibility instead of a hard cut-off. It allows up to 30 percent of students to be currently enrolled in private school. It imposes no new regulations on private education beyond basic reporting to the Department of taxation. And it was passed with the support of more than 60 percent of the Senate.

This is a spectacular law for New Hampshire and should inspire legislators in other states to pass the best education tax credit law their tax system will allow. (Follow these links for model legislation,  tax credit legislative guidelines, and an explanation of why credit percentages are so important.)

Due to the peculiarities of New Hampshire tax law, which makes it difficult or impossible to back out deductions if a taxpayer claims a credit, the credit is set at 85 percent of the donation. But with New Hampshire’s flat 8.5 percent business tax, a donor’s tax liability is reduced by over 93 percent. Since New Hampshire has no standard individual income tax, next up should be property tax credits to ensure even greater participation in education. Other states without these restrictions should pass 100 percent credits for both businesses and individuals, and for both personal use and donations.

I provided analysis and advice on education tax credit policy structure to individuals in New Hampshire, but a policy analyst can only explain why certain structures are better or worse for accomplishing particular goals. The legislators who led on this issue are the ones who are bringing true education reform to New Hampshire, and they should be commended for looking past entrenched interests to what’s best for the state’s children and voters. Unfortunately, that is far from the case in other states.

It is wonderful to see what can be accomplished when lawmakers take principles and policy seriously.