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Published in Print: June 3, 1998, as Despite Talk, Lawmakers Slow To Copy Tax Credits

Despite Talk, Lawmakers Slow To Copy Tax Credits

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After Minnesota lawmakers passed a controversial package of tax breaks last year for a host of K-12 education expenses, Gov. Arne Carlson went on the road to promote the idea as a means of expanding school choice.

In no time, the Republican governor's calendar was booked. Even as recently as last month, he stumped for such breaks in New Hampshire, the traditional starting point for the presidential primary season.

But, despite all the apparent interest, legislators elsewhere have been slow to copy Minnesota's program. The 1997 law offers state income-tax credits that families earning up to $33,500 a year can use to pay for tutoring, academic camps, music lessons, supplies, and other school-related costs. It excludes private school tuition, however.

"There's certainly a lot of activity on this," said Mary Fulton, a policy analyst with the Denver-based Education Commission of the States. "But it seems that most of these [proposals] die on the vine."

But proponents of educational tax breaks predict that public support will grow as more people learn about the concept.

"The idea of tax breaks is still foreign and complicated," said Nina Shokraii, an education policy analyst with the Heritage Foundation, a conservative think tank in Washington. "I believe this idea will get off the ground and gather more momentum than vouchers in future years."

This year, though, efforts to provide tax breaks for K-12 education costs have faltered in Connecticut, Idaho, Indiana, Illinois, and Wisconsin. New York and Rhode Island lawmakers have shown little interest in similar bills that have languished in legislative committees there since January. The exception was Iowa, where lawmakers expanded an existing $150 tax credit for private school costs to $250, and opened the program to public school expenses.

Local Views

One reason the proposals failed to take hold elsewhere is money. Even with strong state economies, legislators have balked at losing millions of dollars in tax revenues through new tax breaks.

In January, Republican Gov. Jim Edgar of Illinois vetoed a $500 state income-tax credit for families whose children attend private schools, saying that the roughly $100 million-a-year cost was too high.

"Local lawmakers are more inclined to look at problems in local education and determine not to divert efforts and money away from public schools," said Diane S. Rentner, the associate director of the Center on Education Policy, a nonpartisan Washington think tank.

Opposition to tax credits can get fierce when their backers seek to include private school tuition under their umbrella. Even Gov. Carlson was forced to concede such a provision in tense negotiations last year with his state's lawmakers. ("Minn. Expands Tax Breaks Tied to Education," July 9, 1997.)

Indiana state Sen. Teresa S. Lubbers, a Republican, used Minnesota's plan as a blueprint for the tax-credit bill she proposed this year. But when she added private school tuition to the list of allowable tax-credit expenses, opponents labeled the measure a back-door voucher program.

"There was an attempt to sabotage it before it got started," Ms. Lubbers said in an interview. The bill passed the Republican-majority Senate before dying in the House, which is split equally between Democrats and Republicans.

"It's definitely a campaign issue now" for November's state elections, Ms. Lubbers added. "House Republicans are using it as a top issue as they campaign across the state."

In Washington, President Clinton has vowed to veto a Republican-sponsored bill in Congress that would create tax-free savings accounts for K-12 school costs, including private school tuition. He and other opponents contend it would siphon limited federal aid away from public schools.

Some fans of school choice, meanwhile, say the Minnesota plan falls short.

"It's unfortunate to include all kinds of remedial and alternative education programs and not cover the ultimate alternative, private schools," said Daniel Cassidy, the director of education policy at the Mackinac Center for Public Policy, a free-market think tank in Midland, Mich.

His center has written language that school choice supporters hope to put on the state ballot in 2000. It would amend the Michigan Constitution to allow tax credits for private school tuition.

Too Soon To Tell

Regardless, it will be impossible to gauge the success of Minnesota's law until 1998 state tax returns are filed next year. Even so, local interest in the program is growing, said Barbara Zohn, the consultant in charge of marketing the program for the Minnesota Department of Children, Families and Learning.

It is her job to explain to local taxpayers that households with incomes that do not exceed $33,500 can get dollar-for-dollar, refundable tax credits of up to $1,000 per child, or $2,000 per family, that they can use to pay for education expenses such as music lessons, art classes, and school supplies.

While private school tuition does not qualify for the credits, Minnesota lawmakers raised existing state education tax deductions, which include private tuition costs, to $1,625 for students in grades K-6 and $2,500 for students in grades 7-12.

Ms. Zohn is also working with private groups to set up "bridge financing" programs to provide loans to poor families, who pay little or no taxes, to spend on education. Families could use their tax refunds--which would equal the difference between their tax bills and the amount they spent on allowable education expenses--to pay back the loans.

Minnesota's tax credits are already a hit with Sherri Kaufmann. The Gaylord, Minn., mother of 10 will subtract $1,000 from next year's income-tax bill--the credit for her 15-year-old son's private art program.

"It seemed like there would be a catch someplace," she said. "Nothing against government people, but they don't usually make good decisions...and this is such a cool program."

Vol. 17, Issue 38, Page 13

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