School choice's ace in the hole.

• Author: Schaeffer, Adam
• Position: National Affairs - Critical essay

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SCHOOL CHOICE is becoming the most popular education reform idea, but not all school choice is created equal. The most powerful kinds allow parents to choose any school--public, independent, or religious. Most of the time, vouchers are what people think of when we are talking about this type of full-fledged choice. Yet, there is another policy that increasingly has been successful in recent years: education tax credits.

Vouchers essentially are checks that the state sends parents to use at schools that the government deems are voucher-worthy. Tax credits, though, reduce the amount a taxpayer owes the government for each dollar he or she spends on a child's education. Moreover, tax credits for donations to scholarship organizations can help support school choice for lower-income families, and personal-use credits can help middle-class families. For instance, if a business owes the state $4,000 and donates $4,000 to a scholarship-granting organization, it would pay nothing in taxes. Similar benefits for donations can be applied to individuals.

Three states have modest forms of personal-use tax credits: Illinois allows families to claim credits worth 25% of their educational expenses, up to $2,500; Iowa allows 25%, up to $1,000; and Minnesota allows 75% of nontuition expenses, up to a maximum credit of $1,000 per child. Five states--Arizona, Florida, Iowa, Pennsylvania, and Rhode Island--have more powerful donation credits. Pennsylvania allows a 90% credit for donations and Florida a 100% credit, helping thousands of children from lower-income families attend good, independent schools.

Education tax credits are a more powerful and bipartisan "third way" school choice reform that promises to spread educational freedom across the country. They are the future of school choice for five reasons:

Education tax credits are more popular than vouchers. Surveys generally demonstrate that tax credits command five to 10% more support than do vouchers. A large academic poll conducted for the magazine Education Next and the Program on Education Policy and Governance at Harvard University illustrates the remarkable wide support for tax credits. Even current and former public school employees favor them by a margin of nearly two to one; public school employees oppose vouchers by a two-point margin.

Vouchers and tax credits fund school choice, but there are big differences between them. Only credits let taxpayers control their own money--they get to spend it directly on a child's education or donate it to a scholarship fund. In a voucher program, taxpayers send their money to the government and it decides how to spend the funds. The Education Next-Harvard survey showed, in fact, that tax credits are more popular with the general public, with 53% supporting them and 45% favoring vouchers. Moreover, there is much more opposition to vouchers, with 34% opposing them and 25% against credits. Some say tax credits are more popular because teachers' unions have spent so much time and money attacking vouchers, but this poll did not even use the word "voucher." Instead, it referred only to "government funds" in the question.

One possible reason for the popularity of credits is that tax benefits are a common and popular policy vehicle, and most Americans have had good experiences with them. For instance, the HOPE Scholarship tax credit (which gives taxpayers credits on a portion of college expenses), child tax credits, and home mortgage deductions are recognized widely and remain popular tax breaks among middle-class voters; these kinds of policies often get more than 70% or 80% support.

Some critics have lamented the proliferation of special interest tax credits and deductions, but these are proliferating for a reason. Tax credits are a popular and relatively easy way to provide benefits for particular types of activities. Credits for education expenses have the same advantages and, unlike a number of other tax benefits, are amply justified improvements on a tax-funded government education monopoly. Education tax credits command the popular support necessary to expand school choice significantly.

Vouchers court legal trouble where tax credits do not. Tax credits are more legally viable than vouchers because they are private funds and vouchers are government funds. State courts repeatedly have ruled that vouchers are government funds, and the disbursement of government funds to religious schools expressly is prohibited in most states by anti-Catholic "Blaine" amendments dating back to the turn of the 20th century. Many states also have "compelled support" clauses, which accomplish the same result through different language. Because the elimination of religious schools from choice programs excludes around 90% of current private schools, this renders any such program largely ineffectual.

Religious clauses are the highest-profile threats to voucher programs, but vouchers are vulnerable to many other constitutional provisions as well. Recent voucher...