Home Education Magazine
May-June 1998 - Columns
Taking Charge - Larry and Susan Kaseman
Are Tax Credits for Educational Expenses a Good Idea for Homeschoolers?
Are tax credits for private schools, including homeschools, a good idea whose time has come? Or are they a misleading political move that will actually provide families with very little money while they increase government control of private education and reduce our educational freedoms? Passage of tax credits for education in some states and proposals in other states are forcing homeschoolers to seriously consider such questions and decide whether to support, oppose, or ignore the proposals.
At first glance, tax credits for homeschooling may sound like a good idea. After all, we homeschooling parents invest a lot of time, energy, and money in educating our children, often making financial sacrifices. Who among us couldn't use more money for our children's education, especially since we already pay taxes to support schools our children do not attend?
However, as homeschoolers, we've learned to look before we leap, to carefully consider short-term and long-term consequences, not to do what everyone else does without weighing the facts and making our own decision, not to embrace something that sounds good at first glance without considering it fully. This kind of questioning and investigation led many of us to homeschooling in the first place. Now we need to look carefully at the questions surrounding tax credits for private education.
This column will discuss how tax credits work in general, why tax credits for educational expenses are being offered at this time, why homeschoolers are being included in proposed tax credits for education, ways in which tax credits will decrease our homeschooling freedoms, reasons that no one will get much money from tax credits, and what we can do to help prevent tax credits for education from having negative impacts on homeschoolers.
How Do Tax Credits Work?
People who meet specific qualifications and who have spent money in ways that the government approves become eligible for tax credits. They can subtract money they have already spent for an expense approved by the government from the tax they owe the federal, state, or local government (depending on which government is giving the tax credit). Sometimes tax credits are set up so that people who are due more credit than they owe in taxes receive a direct payment from the government.
Tax credits differ from tax deductions. Deductions are subtracted from taxable income before taxes are calculated, so they reduce the amount of money on which taxes are owed. They only reduce taxes indirectly by a fraction of the total deduction. In other words, a tax credit is significantly more valuable than a tax deduction of the same size. For example, if a family's state income taxes are 5% of their taxable income (the average return paid by people in Wisconsin), a tax credit of $200 would save them $200 on their state taxes while a tax deduction of $200 would only save them 5% of $200, or a total of $10. In other words, when the tax rate is 5%, a tax credit is 20 times more valuable than a tax deduction of the same amount.
Why Do Governments Offer Tax Credits?
Tax credits are The tools that political leaders and government officials use to try to get people to do what they want them to do. Money is a powerful and frequently used incentive. As a hypothetical example of how tax credits can be used to shape public policy, imagine that environmental groups had convinced government officials in a given state that it would be better for the environment and for that state's tourism industry if cars were equipped with a newly invented device that reduced the pollutants that were emitted from cars. Suppose that this device could only be installed as cars were being manufactured. (Of course, manufacturers of this device would also strongly support moves to encourage people to use it.) One way to get people to use such a device would be to pass legislation requiring that all new cars purchased in the state be equipped with the device. But let's say that the legislature was unwilling to pass such legislation because the devices cost $500 each. So, instead of passing a law requiring this device, another way to get people to buy them would be to offer a $1,000 tax credit to anyone who purchased a new car with such a device, $500 to reimburse them for the cost of the device and $500 as an incentive or reward. Wouldn't many people buying new cars choose the device, or at least seriously consider it?
In other words, tax credits are a tool that political leaders can use to get people to do what the leaders want them to do and/or think they should do. When considering questions surrounding tax credits, remember that tax credits are not a means by which a benevolent government generously gives its citizens a gift. Tax credits are a way of getting people to do something the government wants them to do. When tax credits are offered, it is important to ask what their real purpose is.
Why Are Tax Credits for Educational Expenses Being Promoted?
Government and big business are trying to work together to increase the extent to which schools train students to be the kind of workers that big business needs. One strategy is to increase government support for and control over private education. The hope is that with the help of free market forces and economic competition, private education will produce better workers than public education has. The assumption is that because private schools have to work hard to provide services that appear to be so good that people will be willing to pay for them even though free public education is available and because private schools have to compete with each other and with public schools to attract students, they will try harder and be better than public schools.
At present, the government cannot support private schools too directly by giving them large sums of money, because schools that are tax-supported are recognized to be public schools, not private. Therefore, some political leaders are trying to devise acceptable indirect ways in which government money can be given to private schools. Tax credits are one step in this process. If state legislatures and the general public can be convinced that tax credits to families for relatively modest expenses for education are a good idea, they will gradually get used to and accept the general idea that it is all right for the government to give money to private schools. Then attempts could be made to get tax credits for larger expenses such as tuition to eligible private schools that meet state standards and administer state tests.
In addition, virtually all of the states currently have a surplus in their budgets. A straightforward response would be to explain the situation to taxpayers and refund the surplus, particularly to families with young children, since these people have paid a higher proportion of their incomes in taxes than anyone else during the past 30 years. Instead, politicians are trying to use this money to their own advantage by doing things like offering tax credits for educational expenses.
Why Are Homeschools Being Included in Proposed Tax Credits for Education?
Homeschools are being included in proposals for tax credits for education partly because politicians are usually looking for ways to gain support from various groups and constituencies. They assume that as homeschoolers we will want tax credits as a way of getting money to support our homeschools and that we will think more highly of and be more likely to vote for politicians who support tax credits.
More importantly, however, supporters of tax credits for education want and need support from homeschoolers. Leaders of big business and some politicians favor tax credits for private education, but few other people do, and some powerful interest groups strongly oppose such tax credits. For example:
• Many taxpayers do not support tax credits in general because a credit for one taxpayer means higher taxes for others.
• Public school officials and teachers unions oppose tax credits for private education because private schools are seen as competition for public schools.
• Most private schools are religious. Recent court decisions would limit religious private schools to a small amount of money for things like rental fees for musical instruments. Tuition would not be an eligible expense. Therefore, religious private schools have little incentive to support tax credits for private education. For example, a representative of the non-public school association in Wisconsin estimated, on the basis of the tax credit proposal currently before the Wisconsin Legislature, that the average family with children attending a religious private school would receive a tax credit of $10 to $20 per year.
To gain badly needed support, proponents of tax credits for private education are turning to homeschoolers and sometimes pressuring us. They know homeschoolers tend to be articulate, politically active, determined citizens who get things done. Therefore, tax credits are being offered so we will support broader tax credit legislation and not primarily because these tax credits would be helpful to homeschoolers and not because politicians want to support homeschoolers. In short, attempts are being made to use homeschoolers to pass legislation that would create tax credits for private education.
How Would Tax Credits for Homeschooling Expenses Affect Homeschoolers?
A careful examination of what's actually involved in tax credits reveals that tax credits would decrease our homeschooling freedoms in a number of important ways. In addition, tax credits are carefully designed to sound like people would be getting a sizeable amount of money but to ensure that in fact, no one gets very much money at all. Let's consider each of these points in turn.
First, tax credits would decrease our homeschooling freedoms in several ways.
• One basic reason governments use tax credits is to influence people's behavior. (This was shown in the example above about pollution control devices on cars.) It would be difficult, if not impossible, for us homeschoolers to participate in a system of tax credits without being influenced by the government's ideas about education and therefore having our homeschools increasingly under government control.
• When the government ties tax credits to specific purposes, it has to hold those receiving tax credits accountable, which means the government has to check up on and regulate them in some way. Tax credits cost the government money, directly or indirectly. To be responsible to people who pay taxes and therefore provide the government with money, it needs to hold accountable the recipients of tax money and tax credits. Most people agree that this principle makes sense. For example, we would not want the government to award a contract for road construction and then not follow up to make sure the road was built to specifications.
If homeschoolers receive tax credits, pressure to increase government regulation of homeschooling will come from various sources such as school officials, social workers, some legislators, the same politicians who are proposing the tax credits, and some members of the general public. This is especially likely because some people are already convinced that homeschooling should be regulated more strongly than it is at present, even without tax credits for homeschoolers.
Some people have suggested that legislation giving tax credits to homeschoolers could also include ways of supposedly protecting homeschoolers from increased or unnecessary regulation by the state. However, it is very naive to think that such protection could actually be given. (See the section "Could Tax Credits Be Made Safe For Homeschoolers By Including Provisions that Prevent Increased Regulation of Homeschools?" below.) In reality, if homeschoolers were receiving tax credits, there would be even less chance than there is at present that homeschoolers could eliminate the unreasonable and unnecessary regulation of homeschooling that some states now have, and regulation would undoubtedly increase in states that currently have reasonable homeschooling laws or policies.
• Tax credits for education inevitably increase government control of education. If we agree to tax credits, we are agreeing to let the government determine which expenditures qualify for tax credits and which do not. It would be difficult to prevent our spending decisions from being influenced by the government's list of eligible expenses. For example, suppose we were buying a set of encyclopedias for our family and the one we really wanted to get was not on the list of eligible expenses because it was too radical or allegedly unreliable or religiously based. How difficult would it be to purchase the set we really felt would be best for our family and give up perhaps $500 in tax credits that we could have gotten if we had selected a set on the eligible list, in other words, a set that the government had approved. In ways such as this, the government would increase its control of our homeschools, of private education, of all of education.
• Tax credits would force homeschools to become more like public schools. How would the government determine what expenditures would be eligible for tax credits? Obviously, public school teachers and administrators are generally assumed to be the experts on education in our society today. Public school standards are the ones that our society has officially adopted. Therefore, public school personnel would be consulted and public school standards would be used to determine determine eligibility. As homeschoolers, we would be very unlikely to receive tax credits for expenditures that we know are educational but that are not part of the conventional public school mentality. If we wanted to receive tax credits, we would have to make sure that at least part of our homeschool (the part for which we wanted to receive tax credits) conformed to public school standards.
• Tax credits for education would lead to increased standardization and government regulation of all education, including homeschooling. Tax credit proposals and laws generally include a provisions that only accredited private schools qualify, that only payments to tutors who are certified teachers are eligible for tax credits, and other such requirements. This means that it is very likely that homeschools will be required to meet some sort of "accreditation" requirements, that parents will have to qualify in some way to be teachers, etc. in order for homeschoolers to receive tax credits. Would the money we received through tax credits be worth this kind of surrender to government inspection and standards?
It should be noted that Minnesota law already requires that homeschoolers take standardized tests each year, so strong accountability requirements are already in place in Minnesota. Homeschoolers in states that currently have more reasonable and less restrictive homeschooling laws stand to lose more through tax credits than those in states that have more regulation.
Could Tax Credits Be Made Safe For Homeschoolers By Including Provisions that Prevent Increased Regulation of Homeschools?
In an effort to gain support from homeschoolers for the proposals for tax credits for education, proponents of these measures may offer to include provisions that would supposedly address the objectives listed above. We need to review very carefully any proposals that claim to protect homeschooling freedoms. The proposals may sound good at first, but they simply cannot maintain our homeschooling freedoms in the face of the realities of tax credits as described above. Consider these examples.
• Homeschoolers in Wisconsin have been asked by members of the Governor's staff what kinds of provisions or "firewalls" that protected homeschoolers from increased regulation could be added to tax credit proposals so homeschoolers would support them. It is very important to realize that no legislation can give us such protection. As explained above, the government cannot give tax credits for specific expenditures without accountability. Who would decide how much accountability was enough to justify tax credits for homeschooling expenses? Most homeschoolers oppose any increase in government regulation of homeschooling. In addition, there is no way to control the increases or changes in regulation that the legislature might pass once tax credits are in place and the precedent has been set for increased government regulation of homeschooling. No one has the power to make good on a legislative guarantee that regulation of homeschooling would not be increased as a result of tax credits. In fact, as explained above, the very existence of tax credits themselves would increase the pressure for stronger government regulation of homeschooling.
• Supporters of tax credits for education have also argued that homeschoolers who don't want to take the risk of increased government regulation could simply decide not to claim tax credits for education. However, this approach will not prevent increased regulation of all homeschoolers. Once increased regulations are in place for homeschoolers who want tax credits, it would be very easy to require them of all homeschoolers, especially since critics keep calling for increased regulation of homeschoolers even without tax credits. In other words, a voluntary tax credits program for homeschoolers who are willing to comply with increased government regulation would soon lead to mandatory requirements for all homeschoolers.
A second fundamental fact of life that makes tax credits a poor idea for homeschoolers is that tax credits will not provide homeschooling families much money. Don't be taken in by the oversimplified and misleading statements of supporters of tax credits for education. Instead, realize that tax officials in Minnesota estimate that under the new law the average family there will only receive $200 per year in tax credits for education, and that families whose children attend public schools will receive, on average, more than those involved in private schools, including homeschools. Consider the following realities.
• To receive tax credits, homeschoolers (and everyone else) must first have money available and choose to spend it on eligible expenses. Tax credits are only reimbursements that people receive several months to a year or more after they have spent their own money. Tax credits are not a means by which the government gives money to families so they can spend it on education.
• Those of us homeschoolers who include religion in our homeschooling will undoubtedly be limited in the tax credits we can receive. For example, Wisconsin's proposed tax credits for education state that "'Educational expenses' [do not include] supplies and instructional materials that are used in the teaching of religious tenets, doctrines or worship." Under this proposal, religiously based curriculums in basic subject areas such as reading and math undoubtedly would not be eligible for tax credits. This could include such popular curriculums as A Beka, Alpha Omega, Bob Jones, Christian Liberty Academy, Christian Light, etc.
• Eligible expenses are carefully designed to sound good but to insure that no one can collect much money. For example, consider computers. Wisconsin's proposal offers tax credits for up to $500 for computers and computer software per year. However, very few families will even come close to receiving $500 for several reasons.
• This figure will undoubtedly be reduced during the legislative debate on the bill. (Minnesota allows only $200 per family per year in tax credits for computers.)
• Only computers that are used exclusively for educational purposes will be eligible. The proposed legislation says, "'Computers' means computer hardware, educational [non-religious] software and related [non-religious] educational materials for use in the claimant's home by a pupil and not used in a trade or business." (By the way, notice how much narrower this proposal's definition of education and learning is than our definition as homeschoolers. We realize that a computer used in a home business would provide many valuable educational experiences for our children.)
• If a family's educational software is religiously based, their computer expenses would probably not be eligible for tax credits.
• The initial cost of a basic computer system with a monitor, keyboard, mouse, and software is usually $1,500 or more, which many homeschooling families whose income is within the income limits (see below) may not be able to afford. If people don't spend money on computers because they cannot afford to, they will not receive tax credits for them.
Therefore, when promotional materials supporting a tax credit proposal give the impression that the government would give us $500 per year to spend on computers and software, remember that we would be highly unlikely to get that amount back. A similar analysis would reduce what homeschoolers could expect to collect on other "eligible expenses" as well.
When figuring the actual value of any given tax credit, remember to distinguish carefully between tax credits and tax deducations, since proposals often include both tax credits and tax deductions. As explained above, tax deductions are worth much less than tax credits of the same dollar amount.
• Strict limits on family income will make many families ineligible for tax credits. For example, Wisconsin's proposal states that couples with one child who file joint tax returns and earn more than $30,000 per year are not eligible for tax credits. An additional $5,000 may be added for each additional child, up to $60,000 per year for a family with seven eligible children. A single filer with one child cannot earn more than $25,000, with the same $5,000 per additional child up to a maximum of $55,000. In Minnesota, families whose gross income before taxes is over $33,500 per year are automatically ineligible for tax credits for eduation.
How clever! Most families who have enough economic resources to have spent significant amounts of money on education will not qualify because their incomes are too high. On the other hand, families whose income is low enough that they qualify for tax credits also have less money to spend on education and therefore may not receive tax credits simply because they did not have the money to spend in the first place. (Of course, there would be some eligible families for whom education is such a high priority that they would have spent money on education, especially if they had known they would eventually be reimbursed for their educational expenses. Families would not get very much money from tax credits, certainly not enough to justify risking freedoms in education.
• Tax credits could even end up costing homeschoolers money in the long run. To meet conventional school standards and become eligible for tax credits, as discussed above, many of us would have to buy educational resources we do not now have or want.
The bottom line is that tax credits cost taxpayers and the government money. When some taxpayers pay lower taxes, the government either has to cut its spending or raise someone else's taxes. When tax credits lead to direct payments to people whose credits exceed their tax bill, they cost the government and other taxpayers even more money directly. Therefore, any tax credit legislation will include strict limits on the amount of tax credits available and the number of people who qualify for them.
What We Can Do
• Find out if tax credits for educational expenses, including homeschooling expenses, are being promoted in our state. We can get this information by calling our state legislators or the governor's office and asking whether such proposals are being considered.
• Share this information with homeschoolers we know, with people involved in other private schools, and with others. We can discuss the topic in informal conversation, at support group meetings, etc.
• We can tell our state legislators that we would be opposed to tax credits for homeschooling expenses. They may be quite surprised to hear this, since it is generally assumed that people would like to receive tax credits for anything they possibly could. In addition, most people contact their legislators because they want something, not to explain that they do not want something that many people probably assume they want. Therefore, we need to make it clear to our legislators that we are calling about tax credits for homeschooling expenses not because we want them but rather because we do not want them and in fact would oppose them.
• We can suggest to our legislators and others that instead of tax credits for private education, the current tax deduction for children be increased or that general tax credits be available to all families without being tied to expenditures for education. This would allow families to spend money on the children who are the key to our future. (Because tax credits for families would not be tied to specific expenditures, they would not inevitably lead to government regulation of families. Instead they would function as tax deductions for dependents always have.)
Tax credits for homeschooling expenses are one more example of an idea that might sound good at first, but further examination shows that they would end up diminishing our homeschooling freedoms. In addition, tax credits would be carefully structured so that no family would get very much money. As homeschoolers committed to maintaining our homeschooling freedoms, we need to seriously consider opposing tax credits for homeschooling expenses.
© 1998 Larry and Susan Kaseman
Read more about Homeschooling, Tax Credits for Homeschoolers, Greater Regulation of Homeschooling and the Government Tax Breaks
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