A Suggestion for the Republicans: Change the Tax Treatment of Private School Payments

Since the No Child Left Behind Act was passed, to mixed reviews and with mixed success, I have been thinking about how the Republican Party should promote its education agenda of more choice and less control by teacher unions and other non-parental groups.  This is an agenda that I support.  I think the best idea for the Party to espouse, particularly at the Federal level, would be something that moved away from federal control (like NCLB exerted) and that does not get stuck in the details of how education is provided, which is where debates about vouchers and charter schools eventually end up.

What I have in mind is much simpler — modify the federal tax code to give families that remove their children from public schools and place them in an accredited private school a tax benefit from having done so.  The tax benefit should be that the families get to claim as an income tax deduction the lesser of what they pay to the private school and the average per-pupil expenditures in the district where they would be entitled to enroll their children.  This is the financial burden they are removing from the state or locality.

If a school district had 2000 families, and 200 of them decided to pay a private school to educate their children, then the school district only has to finance public schools that are 90% as large as they would have been.  Relieving a burden on a public entity like that strikes me as comparable to a charitable donation.  So treat that lower burden the same way as all charitable deductions are treated on the tax form.

Importantly, the benefit is not tied to how much the family pays in state and local taxes that are dedicated to public education.  People without children have to pay those taxes as well, and they get nothing directly for it.  The benefit is also not tied to the amount the family pays to the private school (unless it is to reduce the benefit relative to that based on average per-pupil expenditures).  That number can be as high as families want it to be, but only the amount up to the average per-pupil expenditure in their district should be considered budget relieving and thus comparable to a charitable contribution.

The advantages for the Republicans are pretty clear — they get to promote alternatives to public education and school choice from the federal level without having to get into the weeds of arguing that one type of school is better than another.  They can legitimately claim to be adding some fairness back into the tax code.  They simply have to be willing to increase some other general tax to pay for the lost revenue to the federal government.  (Some states that piggyback on the federal income tax formula might have to do the same thing.)

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About Andrew Samwick 89 Articles

Affiliation: Dartmouth College

Andrew Samwick is a professor of economics and Director of the Nelson A. Rockefeller Center at Dartmouth College in Hanover, New Hampshire.

He is most widely known for his work on the economics of retirement, and his scholarly work has covered a range of topics, including pensions, saving, taxation, portfolio choice, and executive compensation.

In July 2003, Samwick joined the staff of the President's Council of Economic Advisers, serving for a year as its chief economist and helping to direct the work of about 20 economists in support of the three Presidential appointees on the Council.

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1 Comment on A Suggestion for the Republicans: Change the Tax Treatment of Private School Payments

  1. If the amount of the credit isn’t tied to the amount of taxes directly attributable to the amount of state and local taxes attributable to the taxpayer, how is this different from refunds to taxpayers who don’t contribute the funds in the first place? This proposal would allow a family with children to receive back both the taxes they paid, PLUS the taxes contributed by childless taxpayers and businesses, some of whom may see a value in investing in public education as a way to reduce future expenses (public assistance, Medicaid, criminal justice, etc.)

    How is that “fair?”

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