Education tax credits would save states billions

Education tax credits -- programs that allow individuals to deduct education expenses from their tax liabilities, or corporations to do the same for donations to scholarship funds -- will save money for states that enact them, finds a new study from the Cato Institute.

In "The Fiscal Impact of a Large-Scale Education Tax Credit System," Andrew Coulson, director of Cato's Center for Educational Freedom, and Ball State University economist Anca Cotet estimate the effect that model legislation for tax credits would have on the budgets of five different states. Accompanying the report is a generalized spreadsheet tool capable of calculating the fiscal impact of education tax credits on other states.

According to Coulson, "In its first 10 years of operation, savings from our model education tax credit bill would range from $1.1 billion for South Carolina to $15.9 billion for Texas," adding that "Illinois, Wisconsin, and New York are estimated to enjoy 10-year savings within that range."

Coulson finds that a gradual phasing in of tax credit programs can ensure that they generate savings from year one, and that these programs will benefit public school budgets as students migrate to private schools. "Our model bill is not only predicted to save money overall, it is expected to increase the funding available per pupil in public schools at the same time," Coulson explains.

Since the Fiscal Impact Calculator tool can be easily applied to any state, Coulson recommends that other states consider implementing education tax credits. "Based on the findings of this study, and given the parameters it assumes, all five states examined would begin saving money under Cato's model tax credit bill from its first year of operation, and these savings would run into the billions after just a handful of years," he concludes. "Any state contemplating the introduction of a school choice program or facing budgetary difficulties would thus do well to consider a large scale education tax credit program."

You can read the complete study.

The Cato Institute is a nonpartisan public policy research foundation dedicated to broadening policy debate consistent with the traditional American principles of individual liberty, limited government, free markets, and peace.

You may like these other stories...

Event Date: August 21, 2014, 2 pm ETMeet budgets and client expectations using project management skills geared toward the unique challenges faced by CPAs.  Kristen Rampe will share how knowing the keys to structuring...
Event Date: August 20, 2014, 2:30 pm ETIn this session we'll review best practices for how to generate interest in your firm’s services. Topics include:Web Based Marketing StrategiesAppointment SettingNetworking...
Recently, there has been a lot of buzz about the future of continuing professional education (CPE). The American Institute of CPAs (AICPA) created a task force on the Future of Learning with an accompanying fancy website. In...

Upcoming CPE Webinars

Jul 31
In this session Excel expert David Ringstrom helps beginners get up to speed in Microsoft Excel. However, even experienced Excel users will learn some new tricks, particularly when David discusses under-utilized aspects of Excel.
Aug 5
This webcast will focus on accounting and disclosure policies for various types of consolidations and business combinations.
Aug 20
In this session we'll review best practices for how to generate interest in your firm’s services.
Aug 21
Meet budgets and client expectations using project management skills geared toward the unique challenges faced by CPAs. Kristen Rampe will share how knowing the keys to structuring and executing a successful project can make the difference between success and repeated failures.