April 7, 2008
RALEIGH – New education tax credits would help more North Carolina parents choose the best schools for their children, while potentially saving the state millions of dollars each year. That’s a key conclusion of a new N.C. Education Alliance Policy Report.
“Education tax credits give the power of choice to low- and middle-income parents and give their children a chance to succeed,” said NCEA Director Lindalyn Kakadelis, who unveiled the report and a tax credit parents’ guide at a news conference today at the Legislative Building in Raleigh. “Research shows that existing tax credits save states millions of dollars each year. Cost-effective, constitutional, and consistent with federal and state tax policy, tax credits enjoy bipartisan support among education reformers and parents. Opportunity is in the hands of North Carolina’s lawmakers.”
State-level tax incentives for education date back to Minnesota in 1955, and the number of states with education tax credits has tripled during the past 10 years, according to the report. “Tax credit laws have passed in Republican-leaning states like Arizona and Florida, in Democrat-leaning states like Rhode Island, Illinois, and Pennsylvania, and in swing states like Minnesota and Iowa,” Kakadelis said. “Widespread support for tax credits derives, in part, from their proven track record.”
The report focuses on two types of tax credit. First, family education tax deductions or credits enable parents to recoup a portion of their children’s education expenses. Parents would use the deduction or credit when filing state income tax returns. “Allowable expenses could include tuition and fees, tutoring, and education technology,” Kakadelis said. “Parents of students in public, private, and home schools could all benefit.”
The second type of credit is called a philanthropy education tax credit. “This credit would go to individuals or businesses that donate to scholarship organizations that, in turn, give scholarships to low-income students to attend a school of choice.” Kakadelis said.
Both of these credits could help address the problems of low student achievement and limited school options, Kakadelis said. “More than two-thirds of the state’s fourth graders are not reading at grade level, according to federal government statistics,” she said. “The percentages are worst among students from low-income families. Some of these students attend poor-performing schools, while others attend good schools but don’t get what they need to succeed.”
Education tax credits would give families more flexibility to choose different school options, Kakadelis said. “Few North Carolina school systems offer magnet schools or other choices, and less than half of the state’s 100 counties have public charter schools,” she said. “Plus state law limits charter school enrollment. But all but 15 North Carolina counties have independent, non-public schools. Tax credits would help many low- and middle-income families that struggle to pay for a good education at one of these private schools.”
North Carolina’s budget could benefit from tax credits as well, Kakadelis said. “Tax credit programs in Pennsylvania, Arizona, and Florida have saved those states $204 million since their programs’ inception,” she said. “Newer programs in Arizona, Iowa, and Rhode Island are likely to generate substantial savings as well.”
“These credits save taxpayers money because the credits cost less than what it costs to educate a student in public schools,” Kakadelis said. “The cost of the credit amounts to less money than the cost of educating the student in the traditional way.”
Education tax credits would likely stand up to any legal challenges, Kakadelis said. “The U.S. Supreme Court and state supreme courts have upheld these credits as constitutional,” she said. “Court decisions in Arizona, Iowa, Illinois, and Minnesota have set important precedents. Plus North Carolina’s Constitution offers none of the barriers that school choice opponents have used to fight similar credits in other states.”
New credits would also mesh well with existing North Carolina tax law, Kakadelis said. “The state now provides families and businesses with a variety of tax credits for items such as conservation, parenting, and helping the poor,” she said. “The addition of an education tax credit would build upon this legacy to help schoolchildren.”
Lawmakers can turn to tax credits to help the students who struggle most with the current public school system, Kakadelis said. “By empowering low- and middle-income families to do what the wealthy have always done — choose a school that best meets their children’s needs — education tax incentives give all children the chance to succeed.”
The North Carolina Education Alliance is a special project of the John Locke Foundation. Since 1998, the Alliance has pursued fundamental reform of the state’s public education system. The Alliance’s mission is to identify and publicize innovative, effective solutions to educational problems.
The North Carolina Education Alliance’s Policy Report, “Education Tax Credits in North Carolina: Innovation in Education,” is available at the NCEA Web site and the JLF Web site. For more information, please contact Lindalyn Kakadelis at (704) 231-9767 or [email protected]. You may also contact John Locke Foundation Education Policy Analyst Terry Stoops at (919) 828-3876 or [email protected].To arrange an interview, contact Mitch Kokai at (919) 306-8736 or [email protected].