Why Tax Credits Are Better than Vouchers

A recent post at the popular conservative blog RedState argues that government-funded school vouchers are a bad idea. It points out the merits of having people pay for their own children’s education and the problems that government funding introduces. Fair enough.

But what to do for the millions of families who cannot afford a good independent education for their kids?

The answer is a nonrefundable education tax credit system applied to state and local taxes. A complete education tax credit program has two parts: a credit for parents to use against their own expenses, and a credit for individuals and businesses that donate to private scholarship-granting organizations (SGOs). The first part helps middle-income families pay for their own children’s schooling, and the second part ensures that low-income families also have the resources they need to participate in the education marketplace.

Under this system, no one is compelled to fund anything to which they might object, and the direct financial responsibility of parents is maximized. The personal credits involve people spending their own money on themselves, and the donation credits allow taxpayers to choose the SGO that receives their donations. No government money is used, but universal access is assured.

I give an exhaustive treatment of the differences between tax credits and vouchers in a paper titled “Forging Consensus.” Two critiques of that paper, along with my responses, appear here.

It is possible to ensure universal access to the education marketplace without sacrificing the freedom that makes markets work.