New Federal Tuition Tax Credit Plans Crowd the Starting Gate

Issue Brief

Tuition tax credits continue to be among the nation’s most popular vehicles to extend parental choice in education to families that otherwise couldn’t afford it. Now two new Congressional proposals introduced in the past month seek to give that time- and court-tested approach a crucial foothold at the federal level.

New York Congressman Vito Fossella in April announced a new education tax credit plan that would offer taxpayers credits of up to $4,500 per year for elementary or secondary school tuition. Fossella, a product of Staten Island public schools himself, has maintained a strong school choice track record throughout his 5 terms in Congress.

“The fact is that the school choice genie is out of the bottle and it’s working in Wisconsin, Arizona, Florida and even the District of Columbia,” Fossella said. “Those who continue to embrace a cocoon-like mentality only serve to smother incentive, stifle innovation and cultivate mediocrity in education by defending the status quo.” Fossella also noted that rising costs have forced many private and religious schools to close in recent years, as working families find it increasingly difficult to keep up with rising tuitions.

Meanwhile, Representatives Phil English (R-PA) and Charles Pickering (R-MS) announced their own federal tax credit legislation for businesses to make contributions to qualified scholarship organizations. Their Business Supporting Education Act would offer businesses tax credits of up to $100,000. To qualify, scholarship groups would need to give at least 90 percent of donations to students whose family incomes fall within 250 percent of the poverty line.

“By providing a common sense tax incentive to encourage businesses in communities across the country to support education, this legislation will ensure that low-income parents also have the ability to provide the right educational resources for their children,” said English, a member of the Ways and Means Committee, which has jurisdiction over tax issues.

The plan is similar in structure to Pennsylvania’s state tuition tax credit, which resulted in 25,000 scholarships granted during the 2004-05 school year.

Both bills were referred to the appropriate Congressional committees, where observers view their near-term prospects for action fairly remote.

The two new plans take their place alongside existing tax credit proposals, notably by school choice stalwarts Trent Franks (R-AZ) and Ron Paul (R-TX). Franks’ Children’s Hope Act is designed to use federal dollars to encourage new state tax credits designed along the lines of Arizona’s highly successful scholarship model. Paul’s more traditional model offers $3,000 tax credits per student for private, parochial or home school costs.