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Commentary: Tax Credit Scholarships: A Win-Win For Everyone

Courtesy of Show Me Institute
Commentator Dr. James Shuls

Imagine going to a school where less than a quarter of students are reading on grade level and a third of your classmates will never make it to graduation. Many students in the St. Louis area do not have to imagine because that is their sad reality. Until recently, students in these failing schools have been trapped unless they could afford private school tuition or they could move to a different school district.

Thanks to a recent Missouri Supreme Court decision students in failing schools now have another option—they can transfer to better schools. As of this fall, roughly 2,500 students left their failing district behind. 

Though students seem to be benefiting from moving to better schools, there are worries that the law may bankrupt the failing school districts and lead to overcrowding in the neighboring ones.

Efforts are already underway to fix the law by setting lower tuition rates and giving accredited school districts the ability to limit the number of students entering their schools. 

This “fix” would make the transfer law more manageable, but it would also limit the number of transfers and relegate more students to the failing schools they so desperately want to flee.

There is however, another solution that could address the issues of overcrowding and finances while still expanding choice—I’m talking about tax credit scholarships. 

A tax credit scholarship is simple. Individuals and corporations provide donations to a scholarship organization in exchange for a credit on their taxes. Scholarships are then provided to pay for tuition at a private or participating public school. This type of program has been tried in a dozen states and has a proven track record. 

There are several clear advantages to this approach.

A scholarship program would reduce overcrowding in accredited districts by expanding the number of schools that students can attend. 

Failing districts would not have to pay tuition for students receiving scholarships. Thus, a scholarship program would lessen the financial burden on unaccredited school districts. Moreover, studies consistently show that tax credit scholarships save taxpayers money. 

And most importantly, a scholarship program allows students and their parents to pick the school that will best meet their needs, whether public or private.

The academic literature is quite clear—students benefit from private school choice options. Eleven of the 12 “gold standard” studies of private school choice programs have found positive benefits for students. Interestingly, studies often find that the public schools also improve from the injection of healthy competition.

No student should be trapped in a failing school. Students deserve better options and they want better options. 

A tax credit scholarship program could potentially be a win-win for everyone. It would address the shortcomings of the current transfer law, while expanding opportunities for students. No other solution promises as much.