Business tax credit offers more options for school choice

A few weeks ago, I wrote a blog post about how Sen. Marco Rubio, R-Florida, introduced a bill that would give tax credits to corporations if they donate to nonprofit organizations that provide scholarships to students in low-income families for private school tuition. Now, state Rep. Michael Connelly, R-Wheaton, has introduced a parallel bill in the Illinois General Assembly....

A few weeks ago, I wrote a blog post about how Sen. Marco Rubio, R-Florida, introduced a bill that would give tax credits to corporations if they donate to nonprofit organizations that provide scholarships to students in low-income families for private school tuition.

Now, state Rep. Michael Connelly, R-Wheaton, has introduced a parallel bill in the Illinois General Assembly. It provides a tax credit to corporations in a similar manner to Rubio’s Education Opportunities Act.

Illinois isn’t the first state to propose corporate tax credit scholarships. In fact, Arizona, Georgia, Florida, Indiana, Iowa, Louisiana, New Hampshire, Oklahoma, Pennsylvania, Rhode Island and Virginia have already enacted similar programs.

They do, however, differ in the amount that corporations are allowed to deduct from their tax bills. Florida offers the maximum possible tax credit at 100 percent, while programs in two-thirds of the other states offer only partial tax credits, as low as 50 percent in Indiana and Oklahoma.

Some critics of these programs argue that high-income students are the only people that can take advantage of these scholarships. This is hardly the case.

In fact, the nonpartisan Pennsylvania Legislative Budget and Finance Committee reported in 2010 that the average scholarship recipient’s family earned only $29,000 annually. The average household income of students participating in the Florida program is only $24,250 – a mere 12.3 percent above the federal poverty level.

Critics also argue that corporate tax credit scholarship programs cost states money in foregone tax revenue. But, they forget that the scholarships granted by the non-profit organizations receiving corporate donations are much lower than state per-pupil spending costs.

A study of the fiscal impact of Arizona’s program in 2009 determined that it saves the state between $100 million to $242 million dollars a year. In 2010, Florida’s nonpartisan Office of Program Policy Analysis and Government Accountability estimated that taxpayers in the state saved $1.44 for every dollar of revenue reduced by the tax credit. The Commonwealth Foundation, a think tank in Pennsylvania, reported that its state saves $512 million a year, while only reducing state tax revenues by $40 million.

Members of the Illinois General Assembly should support Connelly’s Senate Bill 1777 not only because it will save the state money, but also because it is the right thing to do. Putting the power to make educational choices back into the hands of parents is a good first step toward making the education reforms that Illinois desperately needs.