Constitutional Issues Aside, the Problems with Tuition Tax Credits
Kevin Carey is really, really good at explaining things, which is why I highly recommend his recent blog post unpacking the flaws in the thinking behind tuition tax credit programs, such as the Arizona program on whose constitutionality the Supreme Court heard arguments last week.
For reasons I've never quite understood, media, education, and political types sometimes talk and think about tuition tax credits as a kind of "vouchers lite"--a type of support for school choice that centrist and center-left-y types can embrace without going all the way to the big bad V word. But in reality, tuition tax credits are much more problematic than vouchers along just about any line of argument--save one--that can be leveled against vouchers. There's virtually no public accountability for the performance of schools receiving tuition tax credits and, because the programs are administered through the tax code rather than appropriations, very little transparency. Depending on how programs are structured, tuition tax credits can also raise serious equity concerns.
The one area in which tuition tax credits have an advantage is that, because they do not involve the government cutting checks directly to private or religious schools, but instead subsidize them indirectly through tax code, some folks view tax credits as less objectionable on church-state grounds than voucher programs.*
Kevin does a good job of unpacking what's wrong with this line of thinking. In economic terms, there is absolutely no difference between giving someone a tax credit of $x for a particular activity (whether it's paying private school tuition or installing solar panels on their home) and cutting them a government check for the same amount for the same activity. But this reality seems surprisingly hard for people to recognize, which is why we get arguments that tax credits are not really government subsidies because they just let taxpayers keep more of their own money.**
I find it unfortunate that the church-state issues have caused private school choice advocates in some jurisdictions to focus on tuition tax credits, rather than vouchers. I'm neither a supporter nor opponent of vouchers, which I consider a "rearranging deck chairs on the Titanic," issue, tangential to the larger need to dramatically expand the supply of high-performing, publicly accountable schools serving low-income kids.*** But in general, if we're going to offer subsidies for something, it's much better to appropriate funds through the regular budget process and distribute them to recipients in a straightforward and transparent way, rather than working roundabout (or as Kevin says, deceptively) through tax credits, which reduces transparency and further distorts our already ridiculously convoluted tax code. The growth of "tax expenditures" as a policy tool over recent decades is a pernicious force that dramatically reduces transparency and accountability in state and federal budgets by obscuring the extent to which the public is subsidizing all sorts of activities, as well as the costs of these subsidies.
*Personally, I don't find either vouchers or tax credits objectionable on church-state grounds--I'm much more concerned about public accountability for school performance and ensuring equitable access for students--and note that the Supreme Court upheld the use of vouchers for religious schools in Zelman vs. Simmons-Harris. But I also recognize that as a member of what's regarded as the dominant religious group in this country, I may have a limited perspective in looking at this, and recognize the concerns of individuals from non-majority religious, or non-religious, perspectives.
**I recognize that economic arguments =/= constitutional arguments, but I'm not a lawyer so I would not presume to say anything more about that.
*** I do, however, think that any voucher program should include public accountability for school performance and use of public funds, address issues equitable access for low-income students, and bar participating schools from discriminating in admissions or requiring students to participate in religious activities.