Programs allow individuals, businesses to reduce tax liability by donating to nonprofits that in turn provide scholarships for students to attend private schools
INDIANAPOLIS — EdChoice, formerly the Friedman Foundation for Educational Choice, today released a new report that shows savings of at least $1.7 billion from 10 tax-credit scholarship programs operating in seven states between 1997 and 2014. The Tax-Credit Scholarship Audit follows up on previous work examining the fiscal effects of private school voucher programs on state governments, taxpayers and school districts.
Tax-credit scholarships allow individuals and businesses to reduce their state tax liability by making private donations to a nonprofit organization that in turn provides scholarships for children to attend private schools of their choice. The public school system is no longer responsible for educating those students once they leave. This in turn creates relief for public schools from variable costs, which creates savings for taxpayers despite the reduction in state tax revenue.
“These programs are designed to attract capital to education and provide avenues for individuals and organizations to invest in their states. They represent a total win-win for taxpayers and for students who want to attend private schools,” said report author and EdChoice Director of Fiscal Policy and Analysis Dr. Martin Lueken.
Since the Arizona Original Individual Income Tax Credit Scholarship Program was launched in 1997, more than 1.2 million tax-credit scholarships have been awarded to students nationwide. The awards are made through state-based scholarship granting organizations or SGOs. Since their inception, the 10 programs in this study generated cumulative net savings worth up to $3.4 billion—roughly $3,000 for each program participant.
EdChoice CEO Robert Enlow said he hopes state lawmakers and stakeholders take note of the incredible savings these programs generate — but also where those dollars wind up.
“We’re able to calculate with specificity how much educational choice programs are saving, but we’re not able to track where those savings wind up,” Enlow said. “Is that funding redirected to other public school classrooms, passed along to taxpayers or held back for another day? Public officials could make it much easier to find out.”
In addition to overall savings and program usage, the Tax-Credit Scholarship Audit breaks down the 10 tax-credit scholarship programs in seven states—Arizona, Florida, Georgia, Indiana, Iowa, Pennsylvania and Rhode Island— by size, growth, program design, savings and other key factors. These programs represent 93 percent of all tax-credit scholarships awarded through 2014.
EdChoice is a nonprofit, nonpartisan organization dedicated to advancing full and unencumbered educational choice as the best pathway to successful lives and a stronger society. EdChoice believes that families, not bureaucrats, are best equipped to make K-12 schooling decisions for their children. The organization works at the state level to educate diverse audiences, train advocates and engage policymakers on the benefits of high-quality school choice programs. EdChoice is the intellectual legacy of Milton and Rose D. Friedman, who founded the organization in 1996 as the Friedman Foundation for Educational Choice.