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March|April 2003
Identity Crisis By Dashka Slater
Battle Of The Bands By Joshua David Mann
Trial By Prosecutor By Hiroshi Matsubara
Guanxi In Guangzhou By Katherine A. Mason
For Credit By Avi Schick
In Defense of the Slippery Slope By Eugene Volokh & David Newman

For Credit

Vouchers won't give families more choice about where their kids go to school. Tax credits will.

By Avi Schick

ADVOCATES FOR SCHOOL VOUCHERS WERE THRILLED LAST SUMMER when the Supreme Court upheld Cleveland's voucher program. Conservative commentators and President Bush said the court's decision in Zelman v. Simmons-Harris was as historic as Brown v. Board of Education. The Zelman supporters are right about the merit of giving families more choice about where their kids go to school. School choice gives poor kids a way out of failing public schools, and the competition forces those schools to improve. But vouchers, which still face formidable political and legal obstacles, aren't the best strategy for achieving those goals. Reformers should concentrate instead on funding school choice through tax credits.

The problems for vouchers start with state law. In the 1870s, James G. Blaine, the speaker of the House of Representatives, led a drive to amend the U.S. Constitution to bar the use of federal funds for support of religious education. Blaine's proposal wasn't enacted by Congress, but it was a big hit with the states, 37 of which have a "Blaine Amendment" on the books. Not every amendment bars all state funding for religious schools—in the 1990s, courts in Ohio and Wisconsin rejected challenges to vouchers based on their Blaine Amendments—but many of the laws pose serious obstacles. In August, six weeks after Zelman, a Florida court relied on a Blaine Amendment to declare the state's voucher program unconstitutional.

Funding concerns also help explain why only Cleveland, Florida, and Milwaukee have experimented with publicly funded vouchers. Cleveland's program costs about $8 million a year and pays for private schooling for about 4,000 students. While $2,000 isn't much to pay for a child's education—it's significantly less than what states pay per student in the public schools—it still adds a significant line item to the state's budget. Vouchers appear to be an added cost because their opponents have defined education funding as a zero-sum game: Any dollar spent for education that doesn't go to the public schools is tagged as money diverted away from them.

Still, many parents worry that vouchers will leave their children stuck in bad public schools with fewer resources than they had before. That fear helps explain why voters have rejected vouchers every time they've been the subject of a referendum, even in the urban areas with the worst schools. In Michigan, for example, where voters rejected vouchers by more than a 2-to-1 margin, exit polls showed that more than 70 percent of Detroit's African-American voters opposed them. That's not to say African-Americans will oppose vouchers forever. Recent polls show that support for the programs is rising among middle-class blacks, and Milwaukee's voucher initiative got significant support from the city's African-Americans. But, at least for now, many black (and other) voters are skeptical.

Vouchers also pose a problem because of their tie to religious education. In Cleveland, more than 95 percent of the students who used vouchers did so at parochial schools. That's likely to remain the pattern because parochial schools charge less than other private schools, which puts them within reach of the modest tuition offered by voucher programs, and because they're more willing to accept underperforming students.

The participating Cleveland parochial schools, most of which were Catholic, were told that they couldn't make admissions decisions based on a student's race, religion, or ethnic background. That didn't pose a problem, because Catholic schools already enroll many non-Catholic students. But what if a state legislature tells parochial schools taking vouchers that they can't base hiring decisions on religion—in other words, that Catholic schools can't favor Catholics as teachers? It's not just a theoretical question. In Georgia, the United Methodist Children's Home, which receives government money to care for foster children, faces a lawsuit from a Jewish psychotherapist who says he was denied a job because of his religion, as well as from a lesbian former employee who says she was fired because of her sexual orientation.

Even if courts ultimately reject attempts to enforce antidiscrimination laws against religious groups, winning the right to favor those who share your views can generate a backlash. Consider the public relations tailspin for the Boy Scouts caused by the Supreme Court's ruling that the group could keep out gay members. In the current political climate, a legal victory exempting parochial schools from antidiscrimination laws will do little to encourage legislators to channel funds to those schools.

Nor can religious groups rely on legislators to exempt them from state law requirements that conflict with their values. To the dismay of some Catholic groups—several of which recently sued over the issue—New York, California, and other states have exempted only churches, not their charitable affiliates, from the requirement that employer-paid health insurance plans cover contraceptives for women. In December, religious groups applauded when President Bush signed an executive order freeing federal agencies to fund programs operated by faith-based charities that are exempt from antidiscrimination laws. But the president acted himself because he didn't have the votes to enact the measure legislatively, even with the Republicans about to assume control of Congress.

INSTEAD OF VOUCHERS, SCHOOL CHOICE ADVOCATES SHOULD push for tax credits, which would reduce the tax bills of families with education expenses. As the economist Eric Toder points out, tax credits are popular with politicians because they allow for tinkering with social policy without apparent spending increases. Touting the "promotion of social values through the tax code," in the words of former Treasury secretary Lawrence Summers, the Clinton Administration used tax incentives to great effect. Under the administration's leadership, the federal government increased the Earned Income Tax Credit to assist the working poor even as it cut welfare. Toder estimates that tax incentives with a social agenda increased more than 40 percent from 1980 to 1999; meanwhile, tax credits aimed at changing business policy were cut in half.

Tax credits are particularly appealing for state legislatures as they labor to close huge budget deficits. Admittedly, from the point of view of the budget, there's not much difference between giving a taxpayer a $1,000 subsidy or relieving him of $1,000 of tax liability. But politically and legally, credits and vouchers are very different. You don't have to be a libertarian to think that the government isn't giving you a gift when it chooses not to tax a portion of your income.

To be effective and equitable, education tax credits should offer some relief to every family that spends money on school. The amount of the breaks should be staggered by tax bracket. For example, families with the highest incomes (the ones that pay 35 to 38.6 percent of their income to the IRS) could get a tax deduction worth up to $380 for each $1,000 in education expenses. For the same $1,000 expense, middle-income families (the ones that fall in the 27 to 30 percent bracket) could get a $500 credit, which is more valuable than a deduction because it's a direct offset against taxes owed. Low-income families, which pay the IRS from zero to 15 percent of their income, could get a $500 refund from the government, even if that amount is greater than their tax bill. (For the ones who pay no taxes, the $500 refund would operate like the Earned Income Tax Credit, one of the largest and most popular tax relief programs, which also sends checks to people who pay little or nothing in taxes.)

All of these incentives should be available to parents of public school students, who pay for things like uniforms, sports equipment, books, and tutoring, as well as to parents who send their kids to private school. That way, tax incentives can't be accused of diverting resources from the public schools. With public schools increasingly seeking private contributions—in New York City, they raise $100 million a year—tax credits for gifts to educational institutions could go to businesses and other donors too. This would boost donations, because credits can be used as direct offsets of tax liability and so are more valuable than the standard tax deduction. The government could even create "urban education zones" to give special tax breaks to donors who give to the lowest-performing schools.

So far, half a dozen states—Arizona, Illinois, Minnesota, Pennsylvania, Florida, and Iowa—offer some kind of education tax credit to families and businesses. Since the states control the bulk of education spending, school choice advocates have focused their efforts there. But a federal credit is another possibility. Congress already offers a variety of tax incentives to help some families pay for college. A bill to offer those incentives to cover expenses for elementary and secondary school last passed in the House of Representatives in 1978. But in recent years, many lawmakers have expressed support for reviving the idea.

TAX CREDITS ARE ON MUCH SAFER LEGAL GROUND THAN vouchers. The federal Constitution isn't an obstacle: The Supreme Court let Minnesota give parents a $500 education tax credit almost 20 years ago. And the court rejected the claim of a group of plaintiffs who argued that providing a religious group with a tax exemption was the same thing as providing them with a direct grant, in a challenge to New York City's practice of exempting religious organizations from a municipal property tax. The justices said that tax exemptions were "qualitatively different" from direct subsidies. Though the argument would be slightly different for a refundable tax credit to a low-income family, the courts are likely to hesitate before striking down only the portion of a program that benefits poor people.

The Blaine Amendments that bar funds for religious education won't cause trouble either, since they generally apply only to "public funds" or the "revenue of the state." As the Arizona Supreme Court held in 1999, that doesn't include money the state hasn't taxed. Nor are antidiscrimination challenges a likely problem. Religious schools that favor hiring people of the same religion are already allowed to accept tax-deductible donations. There's no reason for that to change because education tax credits are made available to parents.

Critics say that private schools will raise their tuitions to capture the value of the tax credits, leaving parents with the same bills they had before. But with tax credits (and voucher programs), the risk of tuition inflation is overstated. Most private schools are nonprofit or religious institutions. Like the parochial schools that participated in the Cleveland program, they aren't looking to maximize profit. They're more apt to see tax credits as a way to attract students who previously couldn't afford tuition than as an opportunity to raise prices.

Critics also complain that tax credits are far more likely to reward families who would in any event choose private school for their children. That argument loses force if the credits give the biggest break to families with low incomes and if they're available to public school as well as private school parents. And it overlooks the financial benefits that a healthy network of private schools offers the school system as a whole. As the Supreme Court noted almost 30 years ago, "an already overburdened public school system . . . might suffer" if many of the students who now go to private and parochial school switched to public school. New York State, for example, has more than 500,000 private and parochial school students and 2.8 million public school students. In the past decade, about 50 Catholic schools there have closed. When many of their former students switched to public schools, they cost the state more than $10,000 per child.

Tax credits for education expenses aren't necessarily an easy sell: Many states aren't interested in giving students any assistance that falls outside the traditional budget for public schools. "The Supreme Court ruled that the government could properly supply non-religious textbooks to private school kids in 1968, and it took the state of Maryland 34 years to get the message," Dick Dowling, executive director of the Maryland Catholic Conference, has pointed out.

Yet by offering benefits to families of all incomes, whether their kids attend public or private school, education tax credits have the potential to appeal to a broad base of voters and politicians. Democrats could embrace them as a way to help poor families and to increase private donations to cash-strapped school districts. And Republicans are a natural constituency, because tax credits mean lower tax bills and more school choice.

With President Bush in the White House and both the Senate and the House in Republican hands, it's the right time for school choice advocates to push for tax credits. It would be a shame if they were too distracted by the false hope of vouchers to seize the opportunity.

Avi Schick is Deputy Counsel to New York State Attorney General Eliot Spitzer. He has written on legal issues for the New York Times and Slate. The opinions offered here are his own.

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