Tuition Tax Credits, Vouchers, and School Choice – What's the Difference?

By Arnold Fege

With the Senate debating the confirmation of a staunch school choice advocate to become the next U.S. Secretary of Education, veteran Washington insider and public schools advocate Arnold Fege discusses the differences in school choice mechanisms for parents and taxpayers.

Do you think you know about tuition tax credits, vouchers, charters, and magnets?  Most working in education public policy have an opinion and can hold a conversation for 35 seconds. But there are differences, and given the new administration’s desire to instill school choice where possible it is important to understand the history and implications for these ideas.

Most give credit to Milton Friedman for the ideas of free market economic principles being applied to schools and most importantly to changing the locus of control from government to the individual.  Friedman is a classical economist who wrote and studied on capitalism while professor at the University of Chicago and first discussed the idea of school vouchers as far back as the 1960s. However, there is also an international component to these concepts.  Both Sweden and Australia have implemented public funds being divided to allow parents to send their child to the school of the choice and transferring their public allocation of funds to the private school and religious schools.

Active political debate in the US goes back decades starting in the early 1970’s with a federally funded choice program in Alum Rock, Calif. But the debate really heated up as the Reagan administration pushed first for tuition tax credits, and then for Title I vouchers under the Elementary and Secondary Education Act.  Specifically, this issue has been placed before the electorate 22 times since 1966, and the voters have rejected it 21 times. Voters in 13 states and the District of Columbia have considered variants of voucher/tax credit schemes, and, with the single exception of South Dakota, they have rejected all of them. Currently there are 13 states and the District of Columbia that have some type of voucher program, mostly passed via state legislation, except the Washington D.C. program, which was authorized by Congressional statute.

One of the key issues that the federal court has addressed has been the relationship of public money flowing to religiously affiliated schools.  The 1984 Mueller vs Allen U.S. Supreme Court case ruled that there is not a violation of the separation of church and state as the tuition support applied to both non-sectarian and religious affiliated institutions equally and that the parents, not the state, made the decision.

What is important to understand is that there are wide range of tuition tax credit ideas, voucher programs, charter schools and other specialized choice programs.

A tuition tax credit is something that reduces the actual tax you are liable for when completing your federal tax return. This means it is subtracted from your income to reduce the number that is used to then calculate your taxable income. In the case of most low-income taxpayers, they do not declare enough income to be granted a significant credit.

Vouchers work differently. They are something like a coupon that has a specific value but can only be “spent” or used in a specific way.  For example, if there is a Title I voucher, the school district might get $100 and have ten eligible children.  This means that each voucher would be for $10.00.

Using that example, we can then see what happens with a voucher.  If two of those ten children move to a different school the first school now has $80.00 but still needs to buy $100 worth of services or the services need to be reduced, which usually means less instructional time.

Similarly, charter schools have a wide range of definitions.  They are publicly funded schools that often have different employment contracts, some are run by a local school board, others by authority of the state.  Key questions have been, are they evaluated and held accountable in the same way and to the same degree, their financial impact on non-charter public schools, their lack of transparency, quality of student achievement, and effect on parent and community engagement. So far, research has found very mixed results compared to traditional public schools.

We don’t yet know what President Trump will propose, but it’s important to understand how each of these mechanisms works—and does not work—to gear up for the debates and legislative proposals ahead. We must join together to fight for a strong public education for every child, no matter how gifted or disadvantaged, who walks through our doors.

Arnold Fege is ‎President, Public Advocacy for Kids, and a longtime Washington, D.C.-based advocate for public education. Learning First Alliance Executive Director Richard Long contributed to this article.

Views expressed are those of the author and do not reflect the endorsement of the Learning First Alliance or any of its members.

Photo by Ted Eytan via Flickr Creative Commons attribution lic. 2.0

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