Education Tax Credits Are Not Government Subsidies

In criticizing his state’s proposed tax credit-based school voucher program, called the “Opportunity Scholarship Act,” former New Jersey governor James J. Florio writes: “You don’t have to be an economist to understand that [education] tax credits are tax expenditures and, thus, revenues lost to be made up by someone else.”

Is Florio correct in implying that education tax credits are essentially an indirect government subsidy? No, because he evades a crucial fact: The Act would not take money from the government; rather, it would enable citizens to keep their own money—money the government never had in its possession.

Further, the Act “would provide matching tax credits to corporations that contribute to a scholarship program for students to attend outside schools” (my emphasis). If the reduction in money the government seizes from citizens is offset by a reduction in the number of children the state pays to “educate” in government-run schools, then the “revenues lost” do not have “to be made up by someone else.”

If concepts have meaning, the government cannot “expend” money it never took possession of. (For more on this, see my reply in TOS’s Summer 2011 “Letters and Replies.”) In a properly structured program, education tax credits enable individuals to spend their own money, on whom they please, according to their own standards and values, at no cost whatsoever to government or anyone.

While there are good reasons for free market advocates to oppose the Opportunity Scholarship Act, the tax credit funding mechanism is not one of them. Why can’t—or won’t—politicians see that government can’t lose that which it never had?

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Image: New Jersey Department of the Treasury

  • http://pulse.yahoo.com/_CRE6REGHBOCNFLN4NJIXNMIEFM Mike Kevitt

    Maybe it’s because they don’t address the fact that the revenue is for things they haven’t done yet.  If they get less, due to a tax credit, they can make it up by doing less.  But, on principle, they’re suppose to do at least as much, or more, all the time.  They don’t want to do less any more than they want someone else to “make up” the “lost” revenue.  Both would be a compromise of their principles. 

    Advocates of individual rights should recognize compromises of THEIR principles, and refuse to compromise them.  They should demand, even command, recognition and enforcement of them, standing on law and the Constitution.  That could really shake up this “Harper Valley”. 

    If an issue of morality arises, advocates of rights can say their position rests precisely on morality and that their adversaries’ don’t, implying that altruism is not morality, at all, and that egoism is, that egoism is the only morality.  Then, those advocates should just say that, too, explicating the implication. 
     
    They can explain the objective source of rights, and all, but at the end, it’s either/or.  It’s either human life or not-human life.  Take your pick.  Then note the fitting meaning of the word, command, and act on it.  No further debating or intellectualizing about it is needed, fitting or proper.

  • http://pulse.yahoo.com/_CRE6REGHBOCNFLN4NJIXNMIEFM Mike Kevitt

    Maybe it’s because they don’t address the fact that the revenue is for things they haven’t done yet.  If they get less, due to a tax credit, they can make it up by doing less.  But, on principle, they’re suppose to do at least as much, or more, all the time.  They don’t want to do less any more than they want someone else to “make up” the “lost” revenue.  Both would be a compromise of their principles. 

    Advocates of individual rights should recognize compromises of THEIR principles, and refuse to compromise them.  They should demand, even command, recognition and enforcement of them, standing on law and the Constitution.  That could really shake up this “Harper Valley”. 

    If an issue of morality arises, advocates of rights can say their position rests precisely on morality and that their adversaries’ don’t, implying that altruism is not morality, at all, and that egoism is, that egoism is the only morality.  Then, those advocates should just say that, too, explicating the implication. 
     
    They can explain the objective source of rights, and all, but at the end, it’s either/or.  It’s either human life or not-human life.  Take your pick.  Then note the fitting meaning of the word, command, and act on it.  No further debating or intellectualizing about it is needed, fitting or proper.

  • http://www.facebook.com/profile.php?ref=name&id=100000501085308 Martin Lundqvist

    Of course there is an issue of which schools will get the tax credits and which won’t, enticing private schools to adopt government policies in order to avoid a great tax burden.
    It *is* better than a pure voucher system, but worse than a truely free market in education.

  • http://www.facebook.com/profile.php?ref=name&id=100000501085308 Martin Lundqvist

    Of course there is an issue of which schools will get the tax credits and which won’t, enticing private schools to adopt government policies in order to avoid a great tax burden.
    It *is* better than a pure voucher system, but worse than a truely free market in education.