Commentary

A Voucher Defeat in Utah

A small percentage of Utahans went to the polls Tuesday to vote overwhelmingly against the country’s first universal voucher program. The result says less about the program itself than about the difficulty of winning an off-year referendum in the face of an avalanche of national union cash, mobilized public-school employees and a risk-averse public.

The voucher program is dead, but school choice doesn’t have to be. Tax credits for donations to scholarship organizations can help support school choice for lower-income families, and personal-use credits can help middle-class families. Tax credits reduce the amount a taxpayer owes the government for each dollar he spends on education. For instance, if a business owes the state $4,000 and donates $2,000 to a scholarship-granting organization, it would pay just $2,000 in taxes. Similar benefits for donations can be applied to individuals.

Three states have modest forms of personal-use tax credits: Illinois allows families to claim credits worth 25% of their educational expenses up to $2,500. Iowa allows 25% up to $1,000, and Minnesota allows 75% of non-tuition expenses up to a maximum credit of $1,000 per child. Five states — Arizona, Florida, Iowa, Pennsylvania, and Rhode Island — have more powerful donation credits. Pennsylvania allows a 90% credit for donations and Florida allows a 100% credit, helping thousands of children from lower-income families attend good, independent schools.

Education tax credits are less controversial than vouchers, so they provide a way forward in places where it would otherwise be difficult to pass school-choice programs. Broad-based education tax credits that combine personal-use and donation credits to cover most kids are preferable. But with the setback in Utah, reformers will need a policy that has the best possible chance of surviving another ballot challenge, so they may want to proceed incrementally.

Tax credits also enjoy bipartisan support, and they’re already expanding in a number of states. With the support of a Democratic legislature or the signature of a Democratic governor, Arizona, Rhode Island and Iowa passed tax-credit programs last year, and Pennsylvania expanded its existing program. This year a unified Democratic government in Iowa increased the tax-credit dollar cap by 50% to $7.5 million from $5 million. A strong center-left coalition, including many prominent African-American Democrats — most notably, Newark Mayor Cory Booker — supports tax credits. New York’s Democratic Gov. Eliot Spitzer proposed an education-tax deduction in his first state budget and also supports tax credits.

Donation credits also look different to the average voter than universal vouchers. The credits are seen by many as an unremarkable extension of existing tax benefits for charitable giving. A donation credit expands choice through tax incentives and private money, whereas a voucher expands choice through a dramatic change in the funding system for public education. A donation credit is less risky than a universal voucher program, and it therefore has better chances of surviving a referendum.

Education tax credits are a big-tent policy, with more support on the left, right and in the middle. Many social conservatives, libertarians and homeschoolers support tax credits but not vouchers because they fear government funds will bring government control. In Utah, a socially conservative state with more children homeschooled than at private schools, credits could mobilize more enthusiastic support on the right.

The voucher program is dead, but school choice doesn’t have to be.”

Credits offer individuals and businesses the chance to support the kind of education they prefer and help ensure that their education dollars are used effectively. Tax credits can bring parents, nonprofits, taxpayers and businesses together to revitalize education.

Finally, donation tax credits create political dynamics that help reinforce school-choice programs, making it easier to expand them in the future. In Pennsylvania, for instance, the 183 scholarship organizations have become a permanent institutional base for supporters and beneficiaries, and a serious political force.

These institutions, which exist in most of the state’s legislative districts, organize parents and children for yearly letter-writing campaigns and rallies, and keep businesses who donate connected with families and politicians. Individuals, businesses and scholarship organizations that participate in the program will have a direct interest in defending and expanding the law. And expand it has: The program has more than doubled to almost $45 million this year from $20 million in 2001.

Utah reformers can be proud of a well-fought battle against overwhelming odds. Now is the time to take a breath, regroup, and fight for school choice through education tax credits.

Adam B. Schaeffer is an education policy analyst at the Cato Institute.