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Hooked on Tax Credits

by Judy Cresanta

n Arizona today nearly one-third of all students entering 9th grade drop out of school before they complete 12th grade. Only 24 percent of fourth graders are considered "proficient" in reading. Worse yet, only 15 percent of eighth graders are proficient in math. According to the State Department of Education, Nevada’s statistics are just as grim. Our dropout rate at last count remained near double the national average of 5 percent. And in 1997 reading and math proficiency at all testing levels went down.

Despite Arizona’s dismal statistics, that state’s teacher union has opposed every education reform measure to date, including Arizona lawmakers’ most recent effort: tuition tax credits. In 1997 Senator Tom Patterson, with the support of the Arizona Speaker of the House, successfully shepherded such a bill through the legislature to the union’s chagrin. And predictably, the union obtained an injunction to halt the new law’s implementation with the argument that it would "open Pandora’s box." Patterson et al successfully argued before the Arizona Supreme Court last year that "there could be nothing in Pandora’s box more scary than what was presently going on the public school system right now." With excoriating commentary, the Arizona Supreme Court shot down the union’s objections and upheld the tax credit law.

Under Arizona’s tuition tax credit statute, taxpayers can claim up to a $500 credit for contributions to organizations that provide scholarships to children attending private schools. In other words, when someone writes a $500 check to the Arizona School Choice Trust (an organization which helps low-income children attend private schools), $500 is deducted from his state income tax bill. In addition, the law allows taxpayers to claim up to a $200 tax credit for contributions to their neighborhood public school. "That’s right," says Jeff Flake, president of Goldwater Institute, a free-market think tank, "next time your neighbor’s 12-year-old girl knocks on your door asking you to buy a $10 coupon book for the school soccer team, you’ll be able to send her merrily on her way with a $200 dollar tip, no skin off your back, or money from your wallet."

Well, hooray for Arizona. But how could such a plan be adapted to Nevada? We don’t have a state income tax but we do have the sixth highest per capita tax burden in the country. Isn’t there some way we could utilize the same idea and apply it as credit against another tax? The answer is yes.

Nevada’s property tax is used in part to fund the expenditures of local governments, including school districts. It is also used for the state’s bond debt redemption. The property tax, which for all practical purposes is the chief revenue source of school districts in all 50 states, is distributed uniquely in Nevada. The county school districts’ share of local property taxes collected is greater in Nevada than in any other state (49.5 percent of property tax revenues as opposed to 43.6 percent nationally). A property tax credit could be applied for a capped contribution—say, $1,000—to a private education foundation. This foundation would offer scholarships to the children of low income parents, allowing the kids to attend the school of their parents’ choice—private or public. It’s easy to calculate. The tax credit is simply subtracted from the property tax bill after the liability has been calculated. And, it’s cheap to administer—documentation is supplied to county authorities when the property tax check is submitted.

And, contrary to the inevitable attack from the Nevada State Education Association teacher union, a tax credit does not circumvent the U.S. Constitution. Other states, including Arizona, have heard the mantra the union so frequently chants that "tax credits are just another way of rerouting money before it lands in the state treasury," or in this case, the school district treasury. Does the teacher union also claim that tax deductible contributions to churches, homeless shelters and Little Leagues should be claimed unconstitutional because they too reroute potential tax money? Of course not.

While the teacher union can be counted on to believe that all money is just tax money waiting to be collected, another important education reform may now be leaving the station. This year, with Governor Guinn’s help, a "public education" may soon be available from schools other than those the teacher union runs. Up for serious revision at the Legislature this year is the crippled charter-school law passed in 1997. This means Nevada’s parents and children may soon have a chance at schools where education values reign, rather than those of a special interest seeking to maintain its monopoly control.

If allowed to go forward in Nevada, a tuition tax credit will take us one step closer toward an education marketplace. The teacher union may consider it "opening Pandora’s box" but when weighed against the union’s monopolistic vision of public education—and its satisfaction with stagnation and failure—it’s my guess that this is a chance the public is more than willing to take. NJ

Judy Cresanta is president of Nevada Policy Research Institute.


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