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· Illustrates why education providers, in

their children. Together, these personal use

and donation tax credits can create the most

addition to parents and children, need

successful system of educational freedom cur-

to be free of burdensome regulations;

· Summarizes the model tax credit legis-

rently possible. This discussion focuses on the

inherent advantages of tax credits relative to

lation presented in Appendix B in

vouchers, not on the relative limitations or

accessible, layman's terms, and gives

advantages of existing voucher and tax credit

examples in Appendix A of how it

programs. All existing voucher and tax credit

would work in the real world; and

· Presents model tax credit legislation

programs are seriously compromised and lim-

ited. Vouchers and tax credits are, however, very

that provides for educational freedom

different mechanisms for delivering school

by funding choice through personal

choice and it is those differences that will be

use and donation tax credits on state

analyzed below. The analysis reveals that tax

individual and corporate income taxes,

credits are inherently preferable to vouchers

state sales taxes, and property taxes.

across at least five dimensions.

Why Tax Credits Are

Legal Considerations

Tax credits are

Preferable to Vouchers

One of the most important advantages tax

less likely to be

credits have over vouchers is a legal distinction

of great consequence. Courts do not consider

Supporters of educational freedom, per-

challenged in

tax credits to be government money, whereas

haps not surprisingly, sometimes disagree

court, less likely

vouchers are considered government money.7

about what constitutes the ideal school choice

to be overturned

policy. The late Milton Friedman, among

This legal issue has a number of political rami-

many others, viewed his original proposal for a

fications. Political concerns, however, are diffi-

by a court, less

voucher system as the best practical reform for

cult to separate from purely legal ones because

likely to come

the public education system. Other supporters

the interpretation of the law is often driven by

of educational freedom prefer education tax

the political dispositions of judges and the

with burdensome

legal profession as a whole.8

credits. Most school choice supporters have lit-

regulations, and

tle or no preference between these alternatives.5

The fact that the courts and the public gen-

less likely to

erally regard vouchers as government funds

They see any expansion of public-private edu-

and tax credits as private funds has a number

cational choice as a good thing. However, while

accumulate

of important consequences. It means that tax

vouchers and tax credits are both improve-

regulations over

credits are less likely to be challenged in court,

ments on the status quo, each has particular

time.

less likely to be overturned by a court, less like-

strengths and weaknesses.

ly to come with burdensome regulations, and

This section explains why education tax

less likely to accumulate regulations over time.

credits are preferable to vouchers for both

The most important implication is this: tax

practical and political reasons. This does not

credits are a viable option in many states where

mean the current system is preferable to a

effective voucher programs are likely to be

voucher system--quite the contrary. But

struck down on state constitutional grounds.

school choice reformers face a tremendously

State courts have repeatedly ruled that

difficult task, which can be eased by focusing

on the policy with the greatest advantages.6

vouchers are government funds.9 The dis-

bursement of government funds to religious

This discussion considers personal use and

schools is expressly prohibited in most states

donation tax credits as two sides of the same

by turn-of-the-century anti-Catholic "Blaine"

coin; personal use credits are helpful to higher-

amendments that were meant to keep public

income taxpayers with children who can use

funding in Protestant-influenced public

them to offset their tax liability, while donation

schools and away from Catholic parochial

credits create a pool of funds that lower-

schools. Many states also have what are called

income families can access for the education of

3