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November-December 2005 Selected Content

Taking Charge - Larry and Susan Kaseman

Tax Credits: Carrots, Sticks, and Strings

Education tax credits for homeschoolers? Saving $100, $500, $1,000, maybe more on our taxes. Sounds like a good deal. Most of us make financial sacrifices and earn less than we could so we can homeschool our children. Who among us couldn't use extra money for all the learning resources, trips, music lessons, and other opportunities that are available but expensive.

However, closer study reveals that tax credits only allow parents who have already spent a required amount of their own money on things that have been approved by the government to possibly deduct a limited amount of that money from their income tax. Even more important, they will inevitably lead to increased regulation of homeschooling, either when the tax credits are begun or at some point in the future, unless unnecessarily restrictive homeschooling regulations already exist. "There's no such thing as a free lunch." They are not a good idea for homeschoolers. In fact, they are a bad idea for homeschoolers. Despite these facts, a few homeschoolers are supporting or even promoting tax credits.

This column discusses basic problems with tax credits, why and how they would lead to increased regulation, arguments that supposedly support tax credits, and what we can do.

Why Tax Credits Are Not What They Seem to Be

Tax credits are not a means by which a kind government generously gives money to some citizens. Instead, tax credits are politicians' attempts to win support from special interest groups and government officials' attempts to increase control over citizens by giving money (directly or indirectly) to those who comply with government regulations that they do not otherwise have to obey. When we are offered a tax credit, we should be alert, perhaps even suspicious, and ask why it is being offered and what it would cost us.

(Some supporters of tax credits argue that income tax deductions for dependents and property tax exemptions for religious institutions have not led to government regulation. However, these are not really tax credits, and including them in this discussion would cloud the issue.)

The basic nature of tax credits makes it difficult if not impossible for very many families to benefit much if at all from tax credits.

• Recipients of tax credits do not get government money to spend as they chose. Instead, they must spend their own money and hope that officials, including auditors, decide the expenditures meet their requirements. Only people who can afford to spend money that may never be refunded and at best will not be refunded for at least several months can receive tax credits.

• At the same time, only families whose income is below a given level qualify for tax credits. For example, in Minnesota, it's $33,500.

• Combine the two preceding points and it's clear that tax credits are very limited. Families who can afford to spend their own money in the first place often don't qualify for tax credits because their income is too high, and those whose income is low enough don't have the money to spend.

• People who claim tax credits often receive less than expected. Revenue officials in Illinois and Minnesota (two of the very few states that offer tax credits to homeschoolers) explained that tax returns of homeschoolers who claim a significant amount of tax credit are carefully reviewed and often their claims are determined not to meet government requirements. The more tax credit a family claims, the more likely the government is to audit their return.

• Perhaps most important to homeschoolers, tax credits inevitably increase the government's control over both homeschoolers who accept them and those who don't. The government will not simply give a tax credit to anyone who checks a box on their tax return saying, "I am homeschooling." (For one thing, every parent could claim that they are educating their children at home to some extent, including those who also send their children to a conventional school fulltime.) So, if the state is not already strongly regulating homeschooling, it will define what constitutes homeschooling, what expenses qualify as "education," how taxpayers will be required to demonstrate that they actually spent the money, and more. Religious curriculums and educational materials generally do not qualify for tax credits. To meet the government's requirements, homeschoolers have to, self-consciously or inadvertently, adopt the government's principles and beliefs about education, a sad outcome for families who began homeschooling because they wanted for their children an education consistent with their principles and beliefs, not those of the government. For example, tax credit statutes in Illinois and Minnesota include long lists of terms that control what a homeschooler can claim.

Increased regulation may be put in place before the tax credits begin, when they begin, or several years later. For example, the Alaska Department of Education and Early Development is now increasing its restrictions on state-supported home-based correspondence programs that have been operating since 1997. While these programs are not tax credits, they are another type of favor from the government and show how accepting such favors leads to increased regulation. For more details see www.worldmag.com, the web site for World Magazine. It would be a mistake for homeschoolers in states that are currently heavily regulated to assume that they might as well accept tax credits because they have nothing to lose. In fact, regulations can always be increased. In addition, accepting tax credits reduces their chance of being able to reduce the excessive regulations eventually.

What is more empowering to us as homeschooling parents: to take a chance that some money might be refunded after we spend it in ways the government approves or to be able to live, learn, and homeschool according to our principles and beliefs without government interference?

• The public's opposition to using tax dollars to support private education can be seen in recent Gallup polls. Only 38% of respondents favor spending public funds on private schools while 57% oppose it. Public support for state regulation of education can be seen in attitudes toward charter schools. Eighty percent of respondents say that charter schools should be under the same state regulation as other public schools despite the fact that charter schools were designed to be less regulated. In addition, 67% support and only 28% oppose a proposal to increase current requirements that students take tests during one year of high school to requiring tests in grades 9, 10, and 11. (For more information, see www.pdkintl.org/kappan/k0509pol.htm#improveb.).

• Attempts to get tax credits for homeschoolers can easily lead to increased regulation of homeschooling. When legislation is introduced, it is difficult to control what happens to it. Amendments can completely change its direction and intent. For example, legislation to give education tax credits to homeschoolers could easily be amended to include increased regulation of homeschooling. The tax credits could even be removed, so the final legislation only increased regulation of homeschoolers. There is continuing pressure from some school officials, teachers unions, legislators, and others to increase regulation of homeschooling. Having any homeschooling bill in the legislature makes it much easier for such critics of homeschooling to act.

Tax Credits Are Not Helping Homeschoolers in the Few State That Have Them

Only three or four states offer tax credits to homeschoolers, including Illinois and Minnesota. The Illinois tax credit is designed for conventional schools and does not work well for homeschoolers. Very few homeschoolers in Illinois qualify for it, and even fewer file the paperwork to claim the tax credit because doing so would put their homeschooling freedoms at risk. For a strong statement from Christian Liberty Academy asking homeschoolers in Illinois not to claim tax credits because doing so increases the risk of greater state regulation for all homeschoolers, see the Christian Liberty Academy's web site at http://www.homeschoolfreedom.org/class.pdf. According to an official in the Illinois Department of Revenue, the very few tax credit claims made by homeschoolers are often reduced or denied. (Fortunately, since so few homeschoolers have applied for tax credits, Illinois has not yet increased its regulation of homeschoolers.)

Minnesota offers tax credits to homeschoolers, but it also has strong state regulation of homeschooling. Homeschoolers are required to take norm-referenced standardized achievement tests every year with consequences for anyone who falls below the 30th percentile. All homeschoolers are required to submit annual reports; parents who do not have a bachelor's degree must also submit quarterly reports. Because the local superintendent or someone they designate may visit homeschooling families once a year (or more frequently if there is any evidence that a family is not complying with the law), families need to have available documentation showing that they are complying with the compulsory school attendance law, including "class schedules, copies of materials used for instruction, and descriptions of methods used to assess student achievement."

Responses to Inaccurate, Misleading, and Wrong-Headed Arguments in Favor of Tax Credits

Here are arguments sometimes used by supporters of tax credits and information that can be used to counter them.

• Some supporters of tax credits claim that homeschoolers should receive benefits from the government because we pay taxes but don't use public schools. Some claim it is unfair that homeschoolers pay double by paying taxes and also paying for our children's education. There are several responses.

--As citizens and taxpayers, we pay for other institutions and services that we don't use (and sometimes hope not to use), including prisons, fire departments, roads we don't drive on, and parks we don't visit.

--Many people besides homeschoolers pay for public schools they do not use, including families with grown children and people who are not parents.

--Perhaps more important, the American public will not stand by and watch money for education go to schools or individuals without increasingly checking to see how the money is being spent and how well the students are doing. Republicans have recently encouraged and received strong public support for increased testing and other means of accounting through No Child Left Behind and other legislation.

• Some supporters of tax credits claim that homeschoolers should not be concerned because tax credits are not mandatory, so families who oppose tax credits can simply refuse to accept them and pay their full taxes. However, the fact that tax credits are not mandatory does not solve the major problem, the fact that they would inevitably lead to increased regulation of homeschoolers. Experience has shown that when regulation is increased, the new regulations apply to all homeschooler, not just those who accept tax credits or whatever other favor from the government has led to the increased regulation. Voluntary tax credits put all homeschoolers at risk, not just those who accept the tax credits. A study by the Center on Education Policy showed that in the few countries that give government money to private schools, including religious schools, the more money the private schools get, the more heavily they are regulated until the differences between private and public schools are very small.

• Tax credit proposals are sometimes accompanied by assurances from legislators or the state department of education that regulation will not be increased. It is very unwise to rely on such assurances. Such individuals do not have the power to prevent increased regulation through legislation and/or new rules and regulations written by the state department of education.

• Some argue that tax credits are not government money because of a legal technicality. However, the public and legislators see tax credits as "favors" and have and will regulate those who receive them.

• Some argue that it's safe to support tax credits as long as the legislation that creates the tax credit does not increase regulation of homeschooling. However, increased regulation may come after tax credits. Also, a tax credit bill that does not contain increased regulation when introduced can easily be amended to include it.

• Some supporters of tax credits claim that homeschoolers in Illinois and Minnesota have benefited enormously from tax credits. As shown above, this is not the case.

• It's too bad families don't have more money, but it won't solve the problems of economic injustice to turn homeschools into small public schools through state regulation.

What We Can Do To Minimize the Risks of Tax Credits

• We can share our concerns with other homeschoolers and counter arguments that support tax credits.

• We can reduce the likelihood that tax credit legislation will be introduced by explaining to our legislators that we don't want tax credits.

Conclusion

Education tax credits for homeschoolers would not result in significant tax savings for homeschoolers. However, they would lead to increased regulation. Because many people assume homeschoolers want tax credits, and some homeschoolers are promoting them, it is important that homeschoolers who oppose tax credits explain their position.

© 2005, Larry and Susan Kaseman

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