Working Paper: NBER ID: w18525
Authors: Andrew A. Samwick
Abstract: Approximately 10 percent of school-age children in the United States are enrolled in private schools, relieving the financial burden on public school systems, and the taxpayers who support them, of the cost of their education. At present, the tax code does not allow families who provide this financial relief an income tax deduction, even though such relief is a gift to governments for exclusively public purposes and thus analogous to a charitable donation. Using the Public Use Microdata Sample of the American Community Survey and the NBER Internet Taxsim calculator, this paper estimates that granting families who enroll their children in private schools an income tax deduction equal to the per-pupil expenditures in their public school district would cost the federal government an average of $7.75 billion per year over the 2006 - 2010 period. This amount is less than one percent of federal income tax revenues. Because private school enrollment, public school expenditures, the likelihood of itemization, and marginal tax rates increase with taxpayer income, the dollar benefits of this change are positively related to income. At the margin, high-income taxpayers would receive about 35 cents in federal and state tax relief for each dollar of per-pupil expenditures foregone.
Keywords: Private School Enrollment; Tax Deductions; Educational Vouchers
JEL Codes: H24; I22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| tax deductions for donated vouchers (H20) | federal tax liabilities (H20) |
| tax deductions for donated vouchers (H20) | likelihood of families opting for private education (I21) |
| likelihood of families opting for private education (I21) | public school expenditures (H52) |
| tax deductions for donated vouchers (H20) | public school expenditures (H52) |
| private school enrollment (I23) | public school expenditures (H52) |