No credit

A proposal to grant corporations tax credits for donations to private schools has multiple flaws.

June 5, 2012 

These are hard times for public education in North Carolina. Budgets are skin-tight, and, when state legislators address the real or alleged shortcomings of the public schools, they’re prone to do so by cracking the whip – seeking, for example, to abolish tenure for elementary and secondary school teachers, or mandating certain grade-promotion policies.

Private schooling, in contrast, is being shown the love.

The latest valentine is an ambitious plan from Republicans in the state House that would grant corporations tens of millions of dollars in tax credits so lower-income students can attend private schools at less cost to their families. These credits might or might not improve individual educational outcomes, but for sure they’d be a boon to private schooling, which would gain what amounts to a tuition subsidy via the state tax system.

Before the General Assembly endorses any such plan, the proposal’s practical effects on the public schools – and its fairness – should be evaluated with care. This state can’t afford to make a mistake that would harm education as a whole.

In particular, claims by tax credit proponents that the measure would “save taxpayers money” need to be evaluated with great care, and in all their dimensions.

Where’s the boost?

To point out the obvious, if sending students off to private school with only a portion of the money that it takes to educate them in the public schools really were a boost to school districts’ finances – as proponents contend – then superintendents and school board members should be jumping up and down with glee. Yet they don’t seem to be.

Perhaps that’s because they see the corporate tuition tax credits mainly as another way for conservative school reformers to make life easier for families who choose to send their children to private (including religious) schools.

Part of the pro-tuition credit argument is that the resulting competition for students would serve to improve the public schools. Encouraging students from the most educationally ambitious families to leave the public system, however, could be a bad bargain, ultimately diminishing support for individual schools and for public education as a whole.

That would have dire and costly consequences for the students and families left behind, in a state that already ranks near the bottom in financial support for the schools.

Privileged taxpayers

Tax credits for private school tuition are being used in at least eight other states and have been cleared by the U.S. Supreme Court. The idea is that corporations paying taxes in North Carolina would be allowed to direct some of their tax payments to private school scholarships. It would work like this: Companies get full tax credits, dollar for dollar, for the donations they make to organizations that provide private school scholarships.

The program would start small, this year, but by next year the statewide total of available credits would be $40 million, rising to a possible $98 million in 2016. The scholarship organizations would eventually get to keep 9 percent of the money they take in. Scholarship recipients would get up to $4,000.

Heeding a criticism of similar tax credit plans elsewhere, the North Carolina legislation (House Bill 1104) wisely forbids donors from specifying individual students or schools for scholarship aid. And it limits scholarship aid to families earning no more than about $50,000 (for a family of four). Those restrictions could, of course, later be lifted.

Even if they are not, HB 1104 clears a path for corporations, unlike most taxpayers, to specify just how their taxes would be spent (via the credits), and in a way that could well undermine the very schools that all taxpayers should seek to build up. It’s hard to see why public policy should encourage that.

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