The Public Education Tax Credit


Publication Date: December 2007

Publisher: Cato Institute

Author(s): Adam B. Schaeffer

Research Area: Education

Type: Report


Public education is an end, not a means. For a democratic nation to thrive, its schools must prepare children not only for success in private life but for participation in public life. It must foster harmonious social relations among the disparate groups in our pluralistic society and ensure universal access to a quality education. Unfortunately, the American school system has long fallen short as a means of fulfilling these purposes.

This paper offers a more effective way of delivering on the promise of public education, by ensuring that all families have the means to choose their children's schools from a diverse market of education providers. All education providers--government, religious, and secular--can contribute to public education because all can serve the public by educating children.

Educational freedom can most effectively be realized through nonrefundable education tax credits--for both parents' education costs for their own children and taxpayer donations to nonprofit scholarship funds. This paper argues that tax credits enjoy practical, legal, and political advantages over school vouchers. These advantages are even more important for choice programs that target low-income children, as tax credits mitigate some disadvantages inherent to targeted programs. It also contends that broad-based programs are superior to narrowly targeted ones, even when the goal is specifically to serve disadvantaged students. Targeted programs are fundamentally inferior--in both practical and strategic terms--to broad-based programs that include the voting middle class. Finally, accountability in education means accountability to parents and taxpayers. Education tax credits afford this accountability without the need for intrusive government regulations that create political and market liabilities for school choice policies.

To date, school choice policy has spread and grown only slowly, in part because of inadequate legislation. Existing school choice laws fall short in terms of both market principles and political considerations. Pursuing a policy that follows more closely what works economically and politically should increase the likelihood of long-term legislative success, program success, program survival, and program expansion.

Model legislation derived from the policy and political principles detailed below is presented in Appendix B of this paper, and real-world examples of how the legislation would work are given in Appendix A.