Tax credit scholarships are programs that rely on public dollars to subsidize private-school tuition. They work by giving individuals or corporations a break on their state tax bills if they donate to organizations set up just to award private school scholarships.
They are different from voucher programs because the scholarships are funded directly through private donations.
Ten states have laws on the books allowing tax-credit scholarships, and at least 17 others have considered proposals to create them this year, according to the National Conference of State Legislatures.
The first tax-credit scholarship program was established in Arizona in 1997. A total of nine states, including Indiana, Florida and Pennsylvania, have similar programs in place, according to the National Conference of State Legislatures, though details including how the programs are funded and which students are eligible vary from state to state.
In 2012, bills were introduced in the Ohio House and Senate to establish a tax credit scholarship program in Ohio, but did not get far in the legislative process. Those bills were modeled in part on Florida’s policy.
According to the National Conference of State Legislatures:
Tax credit programs provide an alternative to school voucher programs. Supporters of tuition tax credits say they save the state money because annual tuition at a private school is typically less than the per-pupil cost at public schools. This is shown through a nonpartisan analysis of the Florida Tax Credit Scholarship Program. It reported for every $1 spent on the tax credit program, Florida taxpayers saved an estimated $1.49. However, the report notes that the state’s savings is dependent on a proper balance between the cap on the tax credit and the number of qualified students participating in the program. In other words, if the cap is too high, and not enough students participate, the lost tax revenue will be higher than the savings in education funding.
Again, according to the National Conference of State Legislatures:
Opponents of tuition tax credit programs argue that private schools are not as accountable to state and local education achievement standards as public schools. Some states have accounted for this by requiring participating private schools to administer and publish results from a nationally recognized standardized test. Many critics also oppose allowing scholarship recipients to attend private religious schools, claiming it is a violation of the separation between church and state. Some school tuition organizations allow scholarship recipients to attend only specified religious schools. Lastly, the National Education Association points out that moving students from public to private schools harms school districts because they cannot reduce their fixed facilities and transportation costs in proportion to the number of students who leave.