The Opportunities of Education Tax Credits

(Note: This Op-Ed originally ran in the Detroit Free Press on Aug. 3, 2007)

If you’re tired of hearing the same old solutions to intractable public school problems, consider a proposal that enjoys bipartisan support and would help Michigan save multiple millions, improve public schools and provide educational opportunity for all children: universal education tax credits.

Tax credits for elementary and secondary education were proposed in the 1970s by policymakers such as the late U.S. Sen. Daniel Patrick Moynihan, a New York Democrat. The idea has been embraced by an unlikely mix of prominent policymakers, including Democrats like New York Gov. Eliot Spitzer and Newark Mayor Cory Booker, and Republicans like South Carolina Gov. Mark Sanford and former Florida Gov. Jeb Bush.

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Education tax credits provide a tax cut to parents, relatives and philanthropists who make financial contributions that enable children to attend an independent (including private and parochial) school of their choice. At the preschool and college levels, those investing in education have long been able to offset costs with tax credits or deductions. Amazingly, elementary, middle and high schools are the exceptions in the system.

If Michigan were to alter an arcane provision in the state constitution, universal education tax credits could be implemented, allowing parents or relatives who pay tuition at independent elementary and secondary schools to receive a credit against the state income tax or the statewide property tax. Additionally, low-income families with smaller tax liabilities could benefit from the generosity of businesses that would throng to contribute to scholarships.

Why would businesses be generously supportive? For starters, businesses have paid hundreds of billions in taxes for an education system that continues to exhibit disheartening achievement, graduation and remediation trends. Facing global competition, businesses would benefit from reversing these trends and from the Michigan business tax credit they would receive for contributing directly to workforce development.

In Pennsylvania, more than 2,300 businesses have contributed to scholarship-granting organizations since that state’s education tax credit was adopted in 2001. Pennsylvania recently raised the limit on its education tax credit due to the popularity of the program. Indeed, Pennsylvania’s Democratic Gov. Ed Rendell is proud of doubling the total amount of education tax credits during his administration.

Florida, Arizona, Rhode Island, Iowa, Illinois and Minnesota also offer education tax credits and/or deductions.

Education tax credits would save Michigan’s school aid fund about $680 million annually if only 20 percent of current public school students benefited from a credit valued at half of last year’s state foundation allowance. The other half of the allowance could be used to increase public schools’ per-pupil revenues.

A tax credit would help thousands of children escape failing schools. Average tuition for a Michigan independent school — absent grants from a church or other sponsor — is about $4,700, according to preliminary results of an ongoing Mackinac Center survey. That amount is less than half of public schools’ revenues per pupil.

After the tax credit, parents would only have to contribute about $1,200 for tuition, a bill that most families would likely be willing to pay if it allowed them to secure a quality education for their children.

A growing body of research on programs around the country and the world indicate that implementing the program would expose public schools to the positive benefits of competition in a larger education market, thereby helping them improve.

Education tax credits would also help Michigan realize the ideal of public education: equal access to educational opportunities for all children. Today, most children in the public system attend a school based on their ZIP code, not their individual needs. Unless they can afford a house in their chosen district, most parents are left with few alternatives. Districts limit the enrollment of students not assigned to their boundaries and many charter public schools are full.

Michigan policymakers should embrace this bipartisan vision and give voters the opportunity to repeal the Draconian constitutional amendment blocking education tax credits. What could be better than saving school revenue while allowing all Michigan children equal educational opportunities?


Dr. Ryan S. Olson is director of education policy for the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.

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