For the past 30 years there’s been an ongoing narrative that giving parents a greater say in their children’s education will enhance competition in education particularly with public schools. In many instances, parents have benefited from the flexibility that school choice initiatives offer. A tax credit may be just what it takes for a parent to afford private school tuition.
However, this scenario differs from a truly competitive market scenario. Suppose in a region the leading mobile carriers are T Mobile and Verizon and some small outfits. A new year begins with AT&T setting up shops throughout the region based on market conditions and their ability to distribute their products effectively. T Mobile and Verizon will respond by allocating their resources to maintain their hold on the market despite AT&T’s new presence. So, you have the market players competing amongst themselves to meet market demand. Not only that, the businesses, described here are subject to profit and loss meaning they aren’t guaranteed revenue and therefore must find effective ways to obtain in it. No matter what school choice measures are point in place political conditions will always shield public schools from the profit and loss mechanism guaranteeing them steady funds from the taxpayer and an ongoing existence.
I watched an interview with a Ronald Reagan economic advisor who emphasized that businesses drive the economy. Knowing this, he and other advisors advocated for tax rate reductions for all taxpayers. This meant more economic opportunity for buyers and opened the door to businesses on the supply side to meet market demand.
In the instance of tax rate reductions, the government takes a Laissez Faire approach. Policy makers, allow the tax burden to fall to a certain level and taxpayers do as they want with the additional money in their paycheck. Now, with a tax credit as we often see with school choice measures, the taxpayer essentially receives money based on an economic choice they make. Practically, this can have serious consequences since it is a carrot and stick approach. One administration may implement a beneficial tax credit, but the next administration may take it away or attach strings, for instance require schools who’ve received the tax credit from parents to implement a certain curriculum or teach from specific books.
While both forms of tax relief have potential for recall, its important to consider the difference in response and impact. Suppose there’s a tax credit that impacts 15-20% of the population. Now, consider the outcry there will be if a large contingent of legislatures proposes repealing the credit versus a tax relief package from the previous administration which provided substantial savings to 70-75% of the population. The latter will generate more attention from taxpayers and will lead to a greater outcry to public officials. Economically, there’s a good reason. When people can freely allocate their resources, suppliers will have a great incentive to direct their resources to meet society’s needs.
With all this said, what makes the most sense to increase opportunity in education? I’m must tell you; I’m not going to be entirely original. I’ll take a state that funds its public schools with property taxes like Maryland and propose a 30-35% reduction for all property owners residential and business. In Maryland, our sales tax is now 6% and I’d propose lowering it to 4% at the highest. Furthermore, I’d call for a complete audit of all school systems and make the necessary spending reductions in each area. I’d eliminate all reporting that homeschool parents must provide to the government and any reporting required for private school parents. I’d reduce any prevailing wage requirements for new construction on public and private schools. I’d streamline any building requirements for new construction.
These regulation reforms will translate into greater opportunities for schooling, for those existing and schools being constructed. Lower property and sales taxes will translate into a greater market for education and real choice for parents. Furthermore, lower property and sales taxes will make areas throughout Maryland and other states more attractive for business thus improving neighborhoods which means more housing and schools. With schools having a valued presence in the community they can expect needed support to play their valued role.
In His Image 