We continue our discussion of Education Tax Credit Scholarships (Part I, Part II, Part III, PartIV) with a final review of “The Public Education Tax Credit” December 5, 2007 by Adam B. Schaeffer, Cato Institute and a short review of “Do Vouchers and Tax Credits Increase Private School Regulation?” October 4, 2010 a working paper by Andrew J. Coulson, Cato Institute.

Another way of addressing concerns regarding the effect of a broad-based program is to phase it in by grade level, so that the change occurs gradually over a number of years.

Finally, a school choice program can be permanently means tested, reducing the benefits to wealthy families and the overall cost of the program.  This is good policy as well as good politics. The goal of a universal school choice program is to enable universal freedom of choice in education, and that is not the same thing as universal participation in an education tax credit or voucher program.

There is, it must be noted, a political trade-off between the number of families covered and the size of vouchers or tax credits. The politically savvy choice is usually to err on the side of reducing the size of a benefit rather than the number of eligible families in order to build a wider constituency of supporters. The limit to this logic is the benefit floor below which the amount becomes too small to matter.

Targeted vouchers occasionally get passed, but they expand slowly and with difficulty because they do not bring on board organized and powerful political constituencies with an interest in fighting for expansion.

Education tax credit programs have expanded much more rapidly and cover far more children than vouchers despite how recently most were passed; they already support about eight times as many children as do voucher  programs.

Scholarship organizations are able  to work with families and schools to determine the amount necessary to get a child the education she needs, and that amount is usually far less than government per-pupil spending or even many set voucher amounts.  This flexibility in funding levels means that tax credit programs can respond more precisely to a family’s needs and are able to assist many more families than voucher programs with the same amount of funding.  Tax credits are more cost-effective and build a larger customer base for choice, both of which are politically very helpful.

Not surprisingly, targeted tax credits cover more children from low-income families than do targeted vouchers.  Even targeted tax credit programs still require the involvement of  tax-payers, businesses, and scholarship organizations, which then provide crucial organizational and political support for the programs and their expansion  that  compensate in part for a constituency that is small and commands few financial or political resources.

To provide the neediest children with access to a good education, a powerful political constituency must be brought to bear. No school choice program should eliminate the broad middle class in deference to political expediency or arguments about incrementalism, toeholds, or providing for the needy first. Such compromises are no bargain and may well be a dead-end for school choice reform. Low-income children are best served by a large, vigorous, and free education market, and the only way to get that is to include the broad middle class.

Policies that provide for universal school choice are overwhelmingly more popular with important coalition members and the general public than the targeted programs that are usually pursued.  A program may have to be steeply means-tested at first, but the principle of inclusive coverage should be established from the start. The voting middle class must see some real benefits and have a stake in expanding the policy. Their inclusion will help ensure a program’s survival and growth.

A properly designed school choice program should keep regulations on education service providers and consumers to a minimum, relying on existing regulations for similar nonprofit organizations.

If the government  mandates that all schools supported by vouchers or tax credits must follow a particular curriculum, for instance, then in practice parents have only one curriculum to choose from and therefore little effective freedom of choice.  Likewise, if all schools supported by vouchers or tax credits are required to admit students on a first-come or random lottery basis  (such  as  in the  Milwaukee  voucher  program),  then  the schools will be incapable of tailoring their mission and pedagogy to serve students with particular needs, characteristics, or interests.  The result will be a lack of diversity in the kinds of schools from which parents can choose.

Children do not all learn in the same way; some, for instance, may thrive in an environment of self-direction while others need a more structured environment to succeed.  Many schools help children excel through immersion in an environment animated by a particular religion, philosophy, or mission. If schools have no control over their admissions policies, and hence are unable to ensure the commitment of their students to the institution’s values and mission, their ability to shape their environments and character is impeded. While every  child  must  be  served  by  the  education system as a whole, it is unrealistic to imagine that  every  child  can  be  well  served  by  every school within that system. Even the traditional public school system sends hundreds of thousands of children with special needs to the private sector to be educated because it is unable to serve these students itself.  The notion that every public school must and can serve every student is a myth.

The discussion above leads to two solid conclusions: tax credits are preferable to vouchers and broad-based programs are preferable to targeted programs.

Because tax credits are not government funds they are less likely to be challenged in court and more likely to survive when challenged. Because tax credits are not government funds, they make unwarranted  government regulation of participants less  likely,  thus bringing  more  support  to  the  coalition  from conservative  individuals  and  interest  groups. Tax credits are also more popular with the general public and incite less unified opposition from Democratic politicians.  Perhaps most important, tax credits directly involve higher-income individuals and businesses in the program. These groups have more to gain with the passage of tax credits than with vouchers, and their organized support and resources make tax credit programs more likely to survive and expand after passage.

In addition, short- and long-term success in establishing  true  school  choice  is  more  likely when  the  broad  middle  class  is  included  than when a program narrowly targets a special population.  In  school  choice  as  in  other  areas  of reform,  low-income  citizens  are  most  likely  to get the help they need when the middle class is included  in  the  program.  Broad-based  school choice  programs  command  much  more  support  from  political  elites,  interest  groups,  and the  general  public  than  programs  targeted  to special populations. Although a choice program may need to be introduced incrementally by phasing in the program, heavy means-testing, or reducing the size of the benefit, the breadth of coverage should not be limited in an attempt at political compromise.  Targeted programs cut away powerful coalition partners and are left vulnerable. Tax credits mitigate many problems inherent to targeted programs because tax credits require the participation of resource-rich individuals and organizations.  A broad-based strategy that argues for a choice program with wide coverage as a general education reform is most likely to lead to freedom in education.

Do Vouchers and Tax Credits Increase Private School Regulation?” October 4, 2010 a working paper by Andrew J. Coulson, Cato Institute.

In any event, to the extent that our findings can be generalized, they suggest that:

    • Voucher programs are associated with large and highly statistically significant increases in the regulatory burden imposed on private schools (compared to schools not participating in choice programs). And this relationship is, more likely than not, causal.
    • Tax credits do not appear to have a similar association.

These results are robust to widely differing ways of quantifying private school regulation, as demonstrated in Appendix D. Even if some kinds of regulations are viewed as much less or much more important than others, the regulatory impact of participating in a voucher program remains significant and the regulatory impact of participating in a tax credit program remains (in over 99 percent of cases) insignificant. As new programs are enacted, and existing programs are modified, these questions should of course be revisited.

In light of these findings, tax credits seem significantly less likely than vouchers to suffer the Catch-22 described in the introduction—less likely to suffocate the very markets to which they aim to expand access. But several caveats are in order. There is variation in regulatory burden within each type of program as well as between them—so it is important to evaluate programs individually.

Below:  Adam Schaeffer of Cato on school choice for VA families

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