News Release

September 17, 2001

Scholarship tax credit blazes new path for school choice
Groundbreaking study says Arizona tax credits will save taxpayers millions

WASHINGTON—Thousands of Arizona families have benefited from the nation's first scholarship tax credit program. In this first-ever analysis from the Cato Institute, researchers Carrie Lips and Jennifer Jacoby find that scholarship tax credits will continue to be a net winner for Arizona taxpayers, expanding school choice to thousands of families while saving taxpayers millions.

In "The Arizona Scholarship Tax Credit: Giving Parents Choices, Saving Taxpayers Money," Lips and Jacoby provide the first glimpse into the future of the school choice movement. The Arizona scholarship tax credit program allows taxpayers to receive a $500 tax credit for contributions to organizations that give students scholarships to attend private elementary and secondary schools.

"From 1998 through 2000 the tax credit generated more than $32 million, which funded almost 19,000 scholarships through more than 30 scholarship organizations," say the authors. By 2015, they predict "the scholarship credit will be raising $58 million per year, funding between 35,000 and 61,000 scholarships annually, and helping send 11,000 to 37,000 students, who would otherwise attend public school, to schools of their choice." Lips and Jacoby find that the tax credit has been revenue neutral, as the savings from students leaving the public education system offsets revenue lost from the tax credit.

Arizona was the first state to adopt a scholarship credit in 1997. The success of the program helped spur Pennsylvania and Florida to adopt similar credits this spring, and numerous legislatures across the country are considering similar reforms.

"The Arizona Scholarship Tax Credit: Giving Parents Choices, Saving Taxpayers Money"