Arizona’s Scholarship Tax Credit: A New Direction for School Choice?
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In 1997 Arizona pioneered a new approach to education: taxpayers receive a dollar‐for‐dollar tax credit for contributions to organizations that give students scholarships to attend private schools. Critics charged that the tax credit would drain the treasury; supporters believed taxpayers would save money as students use the scholarships to transfer from public to private schools. A new fiscal analysis of Arizona’s scholarship tax credit informs this debate. Data show that the tax credit has raised more than $32 million and funded almost 19,000 scholarships. The credit has been revenue neutral, but moderate assumptions about the growth of taxpayer participation suggest that the credit will ultimately save taxpayers millions of dollars. Could the scholarship credit mark the beginning of a new era for school choice?