Topic: Education and Child Policy

A Taxing Argument over School Choice

Today’s Tucson Citizen column by Robert Robb echoes a point I made a couple of weeks ago:  it is difficult to argue with the AZ appellate court decision striking down that state’s voucher programs for disabled and foster children.

But Robb goes astray when he asserts that:  

Vouchers are much preferable to tax credits. Good tax policy involves low rates on broad bases. Tax credits erode the tax base and depreciate in value as tax rates are lowered. So, reliance on tax credits puts good education policy at odds with good tax policy.

First, it is a mistake to compare two policies solely in terms of their impact on tax policy. There are important substantive advantages of credits over vouchers that outweigh tax policy considerations.

Second, the tax policy case does not actually favor vouchers as it might at first seem. Robb’s argument implicitly compares education tax credit programs with the absence of any government education policies at all, but we must compare credits to the voucher and government schooling alternatives.

Robb advocates low tax rates, but vouchers require much more money to be raised in taxes than do tax credit programs. Tax credits are targeted tax cuts, leaving more money in private hands. Thus, credits win on the “low rates” measure.

Next, the two main reasons for supporting a “broad base” for taxation are:

1) To minimize the extent to which there are favored classes among taxpayers who do not carry their share of the tax burden, and who thus breed resentment among those who must carry a greater burden [undermining public support for the system, and hence the voluntary compliance on which it relies], and

2) To minimize the government’s distortion of taxpayer behavior in the marketplace that can be expected when the state favors some activities and disfavors others.

On both of these scores, tax credits are superior to both vouchers and conventional government schooling.

First, under all three systems – tax credits, vouchers and public schooling – there is a favored class: parents with school-aged children. That class benefits at the expense of all other taxpayers. Nevertheless, tax credits offer the taxpayer a level of discretion and accountability that does not exist under vouchers and government schooling. Under credits, taxpayers choose either the individual recipient of their money or the non-profit scholarship organization that will disburse their money. If a particular scholarship organization ceases to meet their expectations, they can shift their donations to another. This flexibility can reduce the resentment that arises when taxpayers are compelled to pay for types of schooling they find fundamentally objectionable (which can happen under both vouchers and government schooling).  This taxpayer choice also exerts market pressure on scholarship organizations to behave wisely and efficiently in order to keep attracting donations. Voucher programs and government schooling undergo no comparable pressure.

Second, both vouchers and government schooling distort taxpayer behavior more than do tax credits. In fact, under those systems, taxpayer behavior is reduced to one of two options: paying one’s education taxes, or going to jail. Tax credits at least offer the taxpayer some level of choice: the option of choosing the specific child or specific scholarship granting organization who will receive his money. Since tax credit programs, to date, impose fewer restrictions on schools than either vouchers or government schooling, they also exert a less distorting effect on the choices of education consumers.

Credits are thus better not only on their intrinsic merits as a means of ensuring universal access to a free and dynamic education marketplace, they are also better from a tax policy standpoint.

Too Far Inside

Don’t get me wrong. I’m a big fan of Inside Higher ED—the content’s free, they’ve run some stuff I’ve written, and co-founder Doug Lederman has graciously moderated a Cato forum—but those guys have got to get outside of higher ed a little more. That, at least, is what I’m forced to conclude if they really believe the teaser they wrote today for an article about federal efforts to stave off an as-yet nonexistent student loan crisis:

As federal agencies formally unveil plan to avert student loan availability crisis, officials earn grudging credit from players across the political and student aid spectrum.

What exactly constitutes the “political spectrum”? Apparently, a group that ranges all the way from the president of the Career College Association—which lobbies for for-profit colleges—to liberal Rep. George Miller (D-CA), with the head of the Project on Student Debt and the CEO of Sallie Mae in between. It’s a spectrum that consists exclusively of the color blue: People who think Washington should be heavily involved in student aid and send federal money their way–except for Miller, who does the sending.

Obviously, in the real world that’s no political spectrum at all, but maybe when you deal exclusively with Washington and higher ed, you feel like that’s a huge divide, indeed.

Who’s Un-American?

Kevin Carey over at The Quick and the Ed has been in a bit of a spat with Andrew Coulson about education tax credits and school choice, and Andrew has been doing just fine dealing with Carey’s substantive arguments. I just want to quickly hit one of his non-substantive attacks, an all-too-typical smear against people who dare question delivering education through government schools: Preferring a system of private provision of education is “un-American.”

That is utter, utter bunk, and the history of American education makes this abundantly clear. I’m on the road right now on borrowed computer battery time so I offer only one tiny timeline to illustrate this. There are lots of good histories, though, that Carey and others can–and should–read for more in-depth discussion. Anyway, the tiny timeline: The U.S. Constitution was ratified in 1789. Horace Mann began his common schools crusade in 1837. That means that the nation was founded almost five decades before the basic seed of the modern, government-dominated, public-school system was planted. And, of course, the basic building block of the nation wasn’t government schooling, but quite the opposite: individual liberty. The Declaration of Independence–written more than six decades before Mann went to work–explains that.

So what seems “un-American” now?

The “Fundamental” Problem

Goldwater Institute VP Matt Ladner offered his thoughts today on an exchange between the Ed Sector’s Kevin Carey and myself. In the process of defending Cato, Matt suggested that: “The Cato Institute can be accused of being fundamentally opposed to public schooling. I’d guess that they would happily plead guilty to that….”

As I explained in my reply to Kevin, Cato doesn’t take positions, only its scholars do. So, am I “fundamentally opposed to public schooling” as Matt imagines? No.

I’m not fundamentally opposed to, or in favor of, any policy. I do my best to rationally derive policy recommendations by examining the best and broadest possible array of relevant evidence. That means studying school systems from ancient times to the present, from all over the world, and determining if some systems consistently work well or poorly regardless of variations in cultural and economic circumstances. I recommend a free market approach to education, coupled with need based financial assistance to ensure universal access, because that is the pattern that emerges from the evidence. 

Policy scholars who find these conclusions inconsistent with their beliefs might wish to familiarize themselves with the historical and international evidence so that they can form conclusions of their own and offer informed commentary on mine. I’m sure we would all benefit from that process, as would American children.

I Knew We should Have Used the Cone of Silence!

Kevin Carey of Ed Sector blogged yesterday that he has intercepted a communication revealing “what extremist libertarians say when they think they’re talking to one another.”  He is referring to this month’s issue of the highly classified Cato newsletter. I knew we should have used the Cone of Silence instead of 3rd class mail!

The title of Carey’s post proclaims: ”Cato Renounces School Vouchers.” This would be difficult, since Cato has never advocated vouchers, or, for that matter, anything else. The Cato Institute does not take policy positions, its scholars do.

Carey also suggests that I am personally “abandoning vouchers,” citing an interview in our newsletter in which I explain one of the advantages education tax credits enjoy over vouchers. As it happens, I have been pointing to that and other advantages of tax credits for the last decade: in my 1999 book Market Education: The Unknown History, in the 2001 Cato paper  “Toward Market Education: Are Vouchers or Tax Credits the Better Path,” in the 2002 Independent Review essay “Giving Credit Where It’s Due: Why Tax Credits are Better than Vouchers,” and more recently.

Vouchers have many redeeming qualities when compared to both conventional government-run schools and charter schools, but since I concluded, while researching Market Education, that tax credits have important advantages over vouchers, I have recommended credits. 

The most puzzling part of Carey’s post is its conspicuous self-contradiction. On the one hand, Carey claims that tax credits ”only help people who make enough money to pay taxes.” On the other, he quotes my advocacy of tax credits for donations to non-profit scholarship funds serving low-income families. Since such programs already exist and are growing in several states, and are serving people who pay little or nothing in taxes, Carey’s post disproves itself.

Hmm. Is this some devious strategy to undermine “extremist libertarians” by doing our jobs for us, thereby putting us out of work?

AZ Court Kills School Vouchers for Disabled, Foster Kids

An Arizona appellate court struck down two school voucher programs yesterday, finding that they violate a state constitutional prohibition against using public money to aid private or religious schools. The programs, serving disabled children and those in foster care, were unanimously ruled unconstitutional by a three-judge panel of Arizona’s Division Two Court of Appeals.

The ruling and the motivations behind the suit have been attacked by school choice groups, with the Alliance for School Choice calling it “shameful.” Praising the court’s decision, but doing little to allay concerns about the quality of public school instruction, John Wright, president of the Arizona Education Association, tautologically declared that “Arizonans understand that public schools are our pathway to great public schools.…”

What are the legal merits of this decision, and what does it mean for the affected kids and the school choice movement as a whole?

The ruling hinged on whether the vouchers in question can be considered aid to private and religious schools, because Article IX, paragraph 10 of the Arizona Constitution forbids the use of public money for that purpose. Choice advocates argued that the aid is being given to families and that the schools only benefit indirectly. The court found that while families are indeed aided, so too are the schools. However much I want all children to have access to a choice of independent schools competing to serve them, I find it hard to disagree with the court’s conclusion.

That doesn’t mean that the appellate court’s word is final. Choice advocates will no doubt appeal to the Arizona Supreme Court, which could agree with the narrower interpretation of the aid’s beneficiaries.

Even if it does not, yesterday’s ruling leaves open two paths for recreating the stricken programs in constitutionally acceptable fashion. The justices pointed explicitly to one obvious, if difficult, approach: seek an amendment to the state’s constitution that would strike or revise the “Aid Clause” ( Article IX, paragraph 10).

More helpfully, they also note that Arizona’s Supreme Court has already upheld the state’s education tax credit program in the face of an “Aid Clause” challenge (the Kotterman v. Killian ruling of 1999). As the appellate justices wrote yesterday:

Although Jordan and Kotterman… considered constitutional challenges based on this clause that to some extent foreshadowed the arguments presented here, the conclusions in both of those cases turned on facts clearly distinguishable from the facts of this case. In Kotterman, the court disposed of the Aid Clause challenge in a single paragraph, finding the tax credit there was neither an appropriation of public money nor the laying of a tax.

This is one of the reasons that Cato Institute scholars favor tax credit programs over voucher programs, as outlined in our Public Education Tax Credit model legislation and policy analysis. Reviving the two stricken voucher programs could thus be as simple as incorporating them into Arizona’s existing education tax credit program or reconstituting them as separate tax credit programs.

There will, however, be a temporary hitch to even that solution. The U.S. 9th Circuit Court of Appeals will soon be handing down a ruling that will likely strike down Arizona’s tax credit program under a clever, inventive, but thoroughly misguided interpretation of case law. This ruling, which could come down in the next several months, will almost certainly be overturned by the U.S. Supreme Court on appeal, as are so many of the 9th Circuit’s rulings.

Arizona’s disabled and foster children will ultimately enjoy meaningful educational freedom and choice, but they will sadly have to wait another year or two for a few remaining legal clouds to part. In the end, the sun will shine once more.

Educational Freedom Advances in South-East

Having so recently blogged about the expansion of Florida’s k-12 scholarship tax credit program, I’m delighted to be able to add that Georgia governor Sonny Perdue yesterday signed a similar program into law in his own state. Meanwhile, in Louisiana, a modest New Orleans voucher program was passed out of the House yesterday by a nearly 3 to 2 majority (a corresponding bill has already passed out of Senate committee and awaits a floor vote).

While none of these programs is yet big enough to create significant market forces, the growth of the Florida program and the bi-partisan support that it and the New Orleans program are enjoying are promising signs.