Pennsylvania EITC tax credit saves taxpayer money in new study

In Pennsylvania, tax credit scholarships do more than help 50,000 children attend private schools. The savings yielded by students leaving public schools while leaving their per-pupil funding behind has significantly reduced the burden on taxpayers, says a new study by a school choice advocacy group. In a new audit, EdChoice, a nonprofit focused on advancing educational choice, analyzed 10 tax credit scholarships in seven states. Pennsylvania’s Educational Improvement Tax Credit reaped the biggest overall savings.
EITC, one of two tax credit scholarship programs in Pennsylvania, has saved taxpayers between $722 million and $1.7 billion since 2002, the report said. That equates to $3,000 to $5,800 per student. The program receives funding through corporate donations. Businesses that donate can receive 75 cents for each dollar as a corporate tax credit. Total Pennsylvania tax credits are capped at $175 million for any one year. Because this is money forgone to the state government, it results in less revenue available for public school funding based on scholarship amounts and per-pupil funding levels for each district. But, EdBuild’s study says, that is more than offset by revenue that stays behind when the student leaves for another school. Pennsylvania’s tax credit scholarship program is the second largest in the country (behind Florida). Enacted in 2001, EITC covers students’ tuition and school-related fees.  The program is limited to families that have a $91,620 household income or less, plus $15,270 for each additional dependent child.
EdChoice’s calculations are based on approximately 34,000 students utilizing tax credit scholarships in 2014. The program now serves more than 50,000. A key variable in determining savings is where students would be attending school in the absence of the program. The study accounts for a lower-bound estimated 40 percent of students that would enroll in private schools even without tax credit scholarships. The $68.1 million in tax support for EITC represents about 0.2 percent of public school revenues in Pennsylvania. Pennsylvania schools collected $27.6 billion in revenue from school district, state and federal taxpayers in 2013-14.
Next year, the Republican-controlled legislature could consider expanding both tax credit scholarship programs. In October, House Speaker Mike Turzai (R-Allegheny) unveiled a proposal to expand tax credit scholarships.  The $75 million boost would be twice the size of the expansion approved for the current state budget.