Taking Credit for Education: How to Fund Education Savings Accounts Through Tax Credits

20 Pages Posted: 27 May 2016

See all articles by Jason Bedrick

Jason Bedrick

Cato Institute

Jonathan Butcher

Goldwater Institute

Clint Bolick

Government of Arizona - Arizona Supreme Court

Date Written: January 20, 2016


Every child deserves the chance at a great education and the American dream. Unfortunately, decades of student achievement data reveal that the increasingly costly U.S. district school system does not provide an excellent education for all students. State lawmakers around the country are now seeking ways to enhance the ability of families to choose among not only schools, but online classes, personal tutors, and other educational service providers.

Lawmakers in five states have passed laws allowing eligible students to receive an Education Savings Account (ESA) instead of attending their assigned district school or a charter school. Under these ESA laws, the state deposits public funds into private bank accounts that parents can use to purchase a variety of educational products and services.

However, nearly 40 states have constitutional provisions prohibiting the use of public funds at religious schools. These so-called Blaine amendments were originally motivated by anti-Catholic sentiment more than a century ago. State courts have interpreted some Blaine amendments in a manner that may pose an obstacle to private-school-choice laws, including ESAs. Fortunately, lawmakers can design ESAs to avoid such constitutional issues.

This paper will explain how legislators can design an ESA that is privately funded through tax-credit-eligible contributions from taxpayers, similar to tax-credit scholarship programs around the country. Tax-credit-funded ESAs would empower families with more educational options while enhancing accountability and refraining from coercing anyone into financially supporting ideas they oppose. Because they are funded through voluntary contributions rather than public funds, tax-credit scholarships have a perfect record of constitutionality at the U.S. Supreme Court and at every state supreme court that has considered the issue. In Blaine amendment states, tax-credit ESAs could be a lifeline to families in need.

Keywords: School choice, educational choice, education savings accounts, vouchers, education tax credits, scholarship tax credits, educational freedom, tax-credit education savings accounts, Blaine amendment, ESA, STC, & TCS

JEL Classification: I2, I24, I25, H52

Suggested Citation

Bedrick, Jason and Butcher, Jonathan and Bolick, Clint, Taking Credit for Education: How to Fund Education Savings Accounts Through Tax Credits (January 20, 2016). Cato Institute Policy Analysis No. 785, Available at SSRN: https://ssrn.com/abstract=2784893

Jason Bedrick (Contact Author)

Cato Institute ( email )

1000 Massachusetts Avenue, N.W.
Washington, DC 20001-5403
United States

Jonathan Butcher

Goldwater Institute ( email )

500 E. Coronado Rd.
Phoenix, AZ 85004
United States

Clint Bolick

Government of Arizona - Arizona Supreme Court ( email )

1501 West Washington Street
Suite 402
Phoenix, AZ 85007
United States

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