Commentary

School-Choice Alternatives

By Dan Lips
This article appeared on National Review Online on September 6, 2001

Gov. Tom Ridge of Pennsylvania found that it wasn’t fun being the Sisyphus of the school-choice movement. So, instead of pushing vouchers up a steep legislative hill for the fourth time since 1995, he chose a new path to school choice: a scholarship tax credit that will help thousands of children attend better schools as early as this winter.

Under this program, corporations that contribute to scholarship organizations get a credit against their tax liability worth 75 cents on the dollar for a one-year donation and 90 cents on the dollar for two years. The scholarship organizations then match scholarship dollars with low-income students to use at a private or parochial school of their choice.

Since the state began accepting applications for the credit in August, 280 businesses have pledged to donate an estimated $8 million. Daniel Whelan, president and CEO of Verizon, explains his company’s participation: “We get a state tax credit, we deduct it on our federal return, and we improve school choices for low-income people.” Paul Beideman, chairman of Mellon Financial Corporation’s Mid-Atlantic Region, concurs, saying the credit is “a way to give tangible choices to individuals.” Altogether, the tax credit program is expected to raise $20 million for scholarships by next year, enough to send as many as 10,000 students to better schools.

Ridge’s long-overdue school-choice triumph is the latest in a series of victories for education tax credits. In June, Florida governor Jeb Bush signed a similar scholarship provision for corporations, which is expected to fund thousands of scholarships for low-income students in 2002. Pennsylvania and Florida’s scholarship plans were modeled after a highly successful scholarship tax credit in Arizona. Since 1997, Arizona has let individual taxpayers take a tax credit worth up to $500 for donations to scholarship organizations. The tax credit raised enough money to create 15,000 scholarships last year.

Other education tax credits are helping students in other states pursue alternatives to the traditional public-education system. Last year in Illinois, more than 130,000 families took advantage of the state’s tuition tax credit, which lets families subtract up to $500 from their income-tax liability for tuition expenses. In Iowa, a similar tax credit helps families save up to $250 on tuition expenses. And, in Minnesota, a per child tax deduction worth up to $2,500 for tuition will help more than 150,000 families send their children to private school this fall.

This new wave of successes for the school-choice movement gives disheartened supporters hope that more progress will be made at the federal level. President Bush has already signed tax legislation that will help families save for private-school tuition. The legislation expands education savings accounts to allow parents of K-12 students to save money for expenses such as tuition, tutoring, and computer equipment, tax-free. Starting next year, families can put up to $2,000 into these education IRAs with the account earnings growing tax-free. For millions of American families, this small change in the tax code will significantly ease the burden of private-school tuition over a student’s lifetime.

The Bush administration shouldn’t stop there. After watching Congress derail his modest voucher program, the president should understand that a scholarship tax credit is the natural next step to fulfill his pledge to provide more choice and “leave no child behind.” For instance, even a modest $500 federal scholarship tax credit could fund an estimated 3 million scholarships for needy students. Support among conservatives in Congress is already strong, as witnessed by the introduction of numerous scholarship tax credits this year.

School-choice supporters should learn from Gov. Ridge and his six-year struggle for school choice. Instead of taking the long and bumpy road of passing voucher programs through state legislatures, they can help students today by pursuing education tax credits.

Dan Lips is an education researcher at the Cato Institute.