New Hampshire legislators have introduced companion bills to offer tax credits to businesses for donating to private-school scholarship funds with an average scholarship at or below $2,500.
New Hampshire has no sales or income tax, so it funds education through business and property taxes. SB 372 gives businesses a 75 percent credit for donations and limits statewide deductions to $15 million in the first year of the program. New Hampshire spends $2.6 billion on education annually.
“I’d be proposing the bill anyway, but I think it has a good chance of getting through the legislature since we have a strong Republican majority,” said state Sen. Jim Forsythe (R-Strafford), a bill sponsor. “Tax credits have become relatively popular, so it’s not a high political risk for anyone. We’re hoping the governor won’t veto.”
The bill allows scholarship organizations to fund up to the total cost of any private school tuition for a student who transfers from public school, but limits the average scholarship to $2,500. Homeschool students may also receive a scholarship of up to $1,500. House Majority Leader D. J. Bettencourt (R-Salem), Rep. Greg Hill (R-Northfield), and others cosponsored its companion bill, HB 1607. Both bills are in committee.
Eight states currently offer scholarship tax credits. Several more, including Virginia and Utah, are considering such legislation this spring.
Crafting a Tax Credit
The proposal’s sponsors worked with two free-market think tanks, the Cato Institute and New Hampshire-based Josiah Bartlett Center, on bill design.
Cato champions tax credits over vouchers as a way to offer families school choice because of concerns government money will lead to increased mandates. New Hampshire’s constitution also forbids state money from funding religious schools.
“This is probably the best [school choice] bill we’ve had at any time in the past 20 years,” said Charles Arlinghaus, the Josiah Bartlett Center’s president.
Although modeled on other states’ programs, the New Hampshire bills are the only ones that would allow scholarship organizations to give out one-quarter of their scholarships without regard to income level, Forsythe said. This is to cushion families who have sudden dips in income not reflected on last year’s tax statement.
Now a ‘Mainstream Issue’
The scholarship amount is relatively low, Arlinghaus said, because in New Hampshire only approximately 30 percent of a school’s funding comes from state, and property taxes are local. Nationally, public schools average nearly half of their funding from their states.
“[School choice] has made a transformation from ideological issue to practical issue,” Arlinghaus noted. “It’s hard to describe school choice as a new idea, given that it’s 50 or 60 years old, but ideas that never come close to passage don’t receive a lot of scrutiny and attention. As they’re coming closer to reality, a lot more people started to take a look at it and it became a mainstream issue.”
“Scholarship Tax Credit Programs in the United States: Implications for New Hampshire,” Josiah Bartlett Center, January 2012: http://www.scribd.com/doc/79093607/Scholarship-Tax-Credit-Programs-Analysis
Image by D. Sharon Pruitt.