Indiana Legislators Consider Tax Credit Measure

Indiana Legislators Consider Tax Credit Measure
April 1, 2009

Thomas Cheplick

Thomas Cheplick, a freelance reporter for the Heartland Institute, writes from Cambridge,... (read full bio)

The Indiana state legislature is considering a bill to establish a tax credit scholarship program for families to send their children to private K-12 schools.

S.B. 528—introduced in January by state Sen. Carlin Yoder (R-Elkhart County)—is designed to benefit low- and middle-income families. Businesses and individuals who donate to scholarship-granting organizations would receive 50 percent credit on their income taxes.

“We have nearly 8,000 students from low-income families who are paying tuition in Indiana,” Yoder said. “Businesses and individuals who reach into their own pocket and give generously in order to help these well-deserving students should receive a tax break.

“Education funding is a statewide priority, and establishing tax credits addresses a gap in the current system,” Yoder said. “With the economy the way it is, people and businesses may not give as much to educational scholarships. Implementing tax credits would hopefully encourage donors to continue giving and may inspire others to begin donating.”

Would Save State Money

Though previous efforts to give Hoosiers tax credits for K-12 schooling have failed, Robert Enlow, president of the Indianapolis-based Friedman Foundation for Educational Choice, is optimistic about S.B. 528’s passage.

“A very similar bill passed out of the Indiana Senate last year. No one has a crystal ball, but the outlook for S.B. 528 to pass the entire [General Assembly] is good,” Enlow said.

According to the Friedman Foundation’s research, a tax credit program providing scholarships averaging $3,800 per student would save the state $2 million a year, because Indiana’s private schools cost less to run than its public schools.

Options Very Limited Now

Though Indiana currently offers three tax credits for education, none applies to K-12 schooling. The most popular one, which gives a tax credit for college tuition costs, is the model for S.B. 528.

Evelyn Stacey, an education policy analyst at the Pacific Research Institute, notes most Indiana families have no school choice options because they can’t afford private school tuition, and only 41 charter schools exist statewide. A tax credit scholarship program as proposed in S.B. 528 would give them greater access to private K-12 schooling.

Unusual Reluctance

Stacey notes public support is strong. “This year Indiana University’s Center for Evaluation and Education Policy did a survey on school choice. They found 41 percent [of respondents] favor more private school choice options,” she said.

“In the long run, private schools can educate children on less per-pupil funding than public schools,” Stacey added. “The argument that these sorts of tax credits will drain money from public schools is not accurate. Tax credits may initially affect the amount of [state and federal] money in per-pupil funding, but they will not change the local amount, despite fewer enrollments.”


Thomas Cheplick (thomascheplick@yahoo.com) writes from Cambridge, Massachusetts.

For more information ...

Indiana S.B. 528: http://www.in.gov/legislative/bills/2002/PDF/SB/SB0528.2.pdf

“Expanding Choice: Tax Credits and Educational Access in Indiana,” Friedman Foundation for Educational Choice, February 10, 2009: http://www.friedmanfoundation.org/friedman/downloadFile.do?id=350

Thomas Cheplick

Thomas Cheplick, a freelance reporter for the Heartland Institute, writes from Cambridge,... (read full bio)