For the last several months the Arizona media has reported extensively on the state’s tuition tax-credit programs, characterizing them as rife with abuse and a lack of accountability. The investigative stories spurred the state legislature to investigate, but according to testimony presented in those hearings, the tax-credit program saves the state millions of dollars each year.
In a November hearing, Baylor University economics professor Charles North told the Arizona legislature taxpayers save “somewhere between $99.8 million to $241.5 million due to students enrolling in private rather than public schools.”
Since 1997, Arizona law has allowed individuals to receive income tax credits for donations made to school tuition organizations (STOs). STOs must allocate at least 90 percent of their revenue each year to education scholarships to K-12 schools of choice. The program allows up to a $500 tax credit for individuals, $1,000 for those filing jointly.
Program Saves Money
“The program saves money for Arizona taxpayers because it likely reduces enrollment in public schools—enough to more than make up for the revenue given up via the tax credits,” North explains. “The amount of savings can only be estimated based on assumptions, because there are not good enough data available to do a thorough statistical analysis. Thus, how much will be saved depends on one’s assumptions about the number of students who would be in public schools but for the tax-credit scholarship program.”
To calculate the savings, North assumed half of the students currently receiving scholarships from heavily need-oriented STOs would otherwise be educated in public schools, as would one-fourth of scholarship recipients from other STOs. Under those circumstances, Arizona taxpayers would be shelling out approximately $44 million each year, because public schools suffer from greater inefficiency, plus $55 million that would not be credited on their taxes.
“I have one daughter in a public school and two daughters in private school,” North says. “So [beyond favoring letting people choose what kind of school they wish to attend] I do not have any massive pro-private school bias.”
Andrew Campanella, spokesperson for the Alliance for School Choice, a national organization headquartered in Washington, DC, hopes the Arizona legislature will take the data into account as it moves forward to close loopholes in the law that have allowed abuses to occur.
“It is no surprise that Arizona’s tax credit program saves money while providing low-income families with opportunities to send their children to some of the best schools in the state,” he says. “It is a win-win-win. A win for families, a win for taxpayers, and a win for state government.”
Sarah McIntosh ([email protected]) teaches constitutional law and American politics at Wichita State University in Kansas.