The Tax-Credit Scholarship Audit
By Martin Lueken, Ph.D.
In The Tax-Credit Scholarship Audit, EdChoice Director of Fiscal Policy and Analysis Dr. Martin Lueken follows up on previous work examining the fiscal effects of private school choice programs on state governments, state and local taxpayers and school districts. This report analyzes savings from tax-credit scholarship programs, which allow individuals and businesses to reduce their state tax liability by making a private donation to a nonprofit organization that provides scholarships for children to attend private schools of their choice. This audit looks at 10 tax-credit scholarship programs operating in seven states between 1997 and 2014. These 10 programs cover 93 percent of total scholarships awarded to students participating in tax-credit scholarship programs nationwide.
Breaking Down "The Tax-Credit Scholarship Audit"
In this report, you will learn:
Tax-credit scholarship programs have generated at least $1.7 billion in taxpayer savings. It could be as much as double that.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. Operating under a conservative assumption that more than half of those students would have attended private school regardless of the scholarship and one-quarter of them received multiple awards, total savings for taxpayers would still be $1.7 billion over nearly 20 years. In 2014, the last year of the analysis, the 10 programs generated savings up to $485 million combined.
More than 1.2 million students have used tax-credit scholarships to attend private schools in the nearly two decades since such programs have been available.Since the Arizona Original Individual Income Tax Credit Scholarship Program was launched in 1997, a total of over 1.2 million tax-credit scholarships have been awarded nationwide for students to pay tuition at a private school of their choice.
School choice generates savings, but it’s up to lawmakers to reallocate that funding. We don’t really know where it goes.Tax-credit scholarships create savings when a student leaves the public school system because the variable costs associated with educating that student are eliminated. In 2013, for example, 41,771 Florida students who were previously enrolled in public schools used tax-credit scholarships, creating roughly $30 million in savings. That money could have been redirected to other public school classrooms or spent in other ways. Public officials ultimately make that decision, and it can be hard to track.
We took a detailed look at how specific states’ tax-credit scholarship programs operate, how many students are enrolled and how much taxpayers are saving.We examined 10 tax-credit scholarship programs in seven states—Arizona, Florida, Georgia, Indiana, Iowa, Pennsylvania and Rhode Island— and broke them down by size, growth, program design, savings and other key factors. These programs represent 93 percent of students using tax-credit scholarships through 2014. Find out more about scholarships in your state.