Supreme Court Considers Education Tax Credits
The Supreme Court is revisiting the use of tax credits as a mechanism for funding education, and whether religious schools are an appropriate recipient. From an article in the New York Times:
The program at issue on Wednesday gives Arizona taxpayers a dollar-for-dollar state tax credit of up to $500 for donations to private “student tuition organizations.” The contributors may not designate their dependents as beneficiaries. The organizations are permitted to limit the scholarships they offer to schools of a given religion, and many do.
The program was challenged by Arizona taxpayers who said it effectively used state money to finance religious education and so violated the First Amendment’s prohibition on the official establishment of religion.
I argue incessantly against tax credits when they are targeted and devoted to economic development, but I have a more favorable opinion when they are used to fund education. Unlike targeted tax credits, most education tax credit programs don’t favor certain groups over others. Anyone can take advantage of these credits — individuals, corporations, etc. It’s not an über-exclusive group, like filmmakers or beef producers.
Education tax credits are a mutually beneficial strategy: Individuals and companies can reduce their tax burden and schools can be funded. There are direct/personal use credits (on a need basis) and scholarship donation credits (to serve the poor). This means that low-income populations particularly benefit from these tax credits; if a person doesn’t make enough to pay taxes, then his or her children are typically eligible for a scholarship.
As a positive consequence, education tax credits preserve choice and freedom in education. By increasing competition between schools, much like vouchers do, education tax credits incite schools to improve in order to continue to attract students. This is particularly important in cities that have low-performing schools, such as Saint Louis.
Perhaps Missouri should consider offering education tax credits as a mechanism for school funding. Missouri presently offers charitable tax credits that are similarly structured, such as the Food Pantry Tax Credit. Programs such as these set up a structure for a civil society that can someday replace government programs. This would be beneficial, because charitable organizations can allocate resources more efficiently and effectively than government.