Garden State Ripe for Tax-Credit Scholarships

So what changed? The study doesn’t say, but the Wall Street Journal notes that taxes on incomes starting at $500,000 increased 40 percent, from 6.37 percent to 8.97 percent beginning in 2004. Today, New Jersey faces a $2.2 billion budget deficit. Governor Chris Christie proposed freezing some spending and coming “to terms with the fact that we cannot spend money on everything we want. Today, the days of Alice in Wonderland budgeting in Trenton end.” Experts agree that New Jersey can no longer tax and spend its way to fiscal solvency. Still, Gov. Christie’s proposed $475 million education spending freeze is causing controversy.

Adopting a tax-credit scholarship program, a policy embraced by two states favored by New Jersey’s well-heeled tax refugees (Florida and Pennsylvania), could help expand education options for families of all socio-economic backgrounds, as well as yield higher annual savings than the proposed spending freeze.

At nearly $17,000 per student, New Jersey is a grade-A public-school spender. Its public schooling system also receives nearly one out of every four dollars the state spends (See p.10, Table 5). Yet for all that spending, a majority of New Jersey fourth and eighth graders is not proficient in reading or math. Such poor productivity is unsustainable, and now is the time to adopt a tax-credit scholarship program.

These programs let taxpayers claim a credit against their state income tax liability for charitable contributions to non-profit scholarship-granting organizations. There are currently nine tax-credit programs in seven states that allow individuals and/or businesses to make such tax-deductible contributions.

If New Jersey adopted such a tax-credit scholarship program, a $500 million savings could be achieved if around 3 percent of public-school students used scholarships worth $5,000 to attend private schools instead. There would be an up-front revenue loss, as with any allowable tax credit, of $215 million. But not having to educate 3.1 percent of students in public schools would save the state nearly $722 million-for a net annual savings of more than $506 million. Scholarship amounts could be pro-rated according to family income and size and still generate such savings.

Thus, a Garden State tax-credit scholarship program could achieve ongoing savings, while expanding education options for families and introducing competitive pressure for all New Jersey schools to improve-benefitting students and taxpayers now and years from now.

NOTE: A more extensive op-ed on this subject appeared in the Feb. 16, 2010, edition of the Ashbury Park Press. See: Tax-credit scholarships could ease school funding burden.

This blog post originally appeared on Independent Women’s Forum Inkwell.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

Scroll to Top