Tuition Tax Credits: A Bad Bargain

Feb 24, 2015

By MBPC Staff

Ensuring that our children receive the best education possible should be our collective goal. The state of Montana has one of the best public education systems in the country, with our students at the top in math, science and English, and ranking in the top 10 for graduation rates. But without a doubt, there are children who are struggling, and the debate ensues as to how we can better serve these children. One strategy that we should avoid is spending public tax dollars to fund private education. House Bill 433, which received a hearing in front of the House Education Committee last Friday, would, in the words of its sponsor, "help...parents that lack the necessary financial means to give their children every available chance to succeed" by providing a tuition tax credit. This same narrative was used back in 1997 when Arizona put into place a private school tuition tax credit that has since cost the state $350 million in revenue, a figure that continues to rise. Whether this is a result of unintended consequences or, in fact, a matter of accomplishing exactly what it set out to do, the experience from Arizona should serve as a warning to those in our legislature considering this measure on the merits presented. Consider, for example, that in Arizona, only 5-15% of students receiving the tax credit were newly enrolled in private school. A tax credit such as this merely reallocates taxpayer dollars to families that are already enrolling in private schools. Read our recent report on tuition tax credits here. Focusing now on the bill under consideration in Montana, a few more critical observations are in order. For one, this credit is unlikely to help make private school attainable for those living in rural communities where private schools do not operate. Over two-thirds of the private schools in Montana are located in just eight counties. This sets up unequal treatment of rural students. Second, this credit is unlikely to help low-income families because this credit is nonrefundable. This means those families who may be working and paying payroll taxes, but incomes are too low to pay income taxes, will not be eligible for this credit. For lower-income and moderate-income families that may be eligible for the credit, the amount of the credit will cover only a small portion of tuition, thereby making it unlikely to actually make private school more attainable. Without question we can and should strive to do more for our children. But House Bill 433 and bills like it will only serve to reallocate public taxpayer dollars to those families already planning to enroll their children in private school, rather than investing in our public schools to help promote innovation and quality education for all children in this state.