Another Look at Education Tax Credits

Earlier this year Michael LaFerrara advocated education tax credits in an article for the Objective Standard. I criticized a number of his important assumptions. He responded. So that would seem to put me back at bat.

As much as I appreciate LaFerrara’s enthusiasm for tax credits and for trying to move education in a better direction, I continue to think he overstates the potential of tax credits for advancing liberty, understates their inevitable problems, and fundamentally misunderstands the alternative.

My Position

LaFerrara claims I initially “leaned in favor of an education tax credit plan,” then “moved in the opposite direction,” concluding that “tax credits… must be rejected.” That’s not quite right.

In the February 4 article I coauthored with my dad Linn, we built on the idea of “choice” in education. We progressed from vouchers to tax credits for parents, then to more-ambitious universal tax credits.

Then we concluded that real choice consistent with individual rights means leaving people free to spend their resources however they want, consistent with other people’s rights. We wrote that even a tax credit plan “falls short of the standard of individual rights and free markets, for it requires people to direct a portion of their resources to schools. Real liberty means people can spend their earnings however they wish, whether for schools, medical research, a new business, or a trip to the Bahamas.” (Note that parents do have a responsibility, and a legally enforceable one at that, to provide for their children’s intellectual development; however, Laferrara goes far afield in attempting to link this to possible “standardized testing.”)

In my June 18 reply to LaFerrara, I did not conclude that tax credits “must be rejected;” as LaFerrara notes, I wrote, “There might be other good reasons for promoting universal tax credits for education, but tax credits will not eliminate government controls over education spending.”

If it seems like I’m taking an ambiguous position on tax credits, it’s because I am. My position is this. Because tax credits fundamentally presume the government’s authority to forcibly transfer wealth for education, I do not believe they are worth the investment of resources necessary to achieve them. At best, tax credits threaten to muddy the ideological waters.

Am I going to morally condemn people who advocate tax credits? No. Am I going to help finance their campaigns? No. Will I endorse and vote for a decent tax-credit proposal? Yes. Am I going to point out the inherent and potential problems with tax credits? Yes. Doing so keeps the debate focussed on the fundamental issue of individual rights, and it helps ensure that, if a tax credit proposal comes about, it will be a relatively better sort.

Principles and Incrementalism

On one hand, LaFerrara suggests I want to achieve the “ideal of free market education… in a single sweeping transformation”; on the other hand he claims I support “a much more subdued reform agenda” than tax credits. Neither claim is accurate.

Advocating the complete separation of school and state may be called many things, but I do not think “subdued” makes the list. I regard the agenda as rather ambitious.

But ambitious, principled reforms can (usually) only be achieved incrementally. Contrary to popular myth, there is no inherent clash between principles and incrementalism. The enemy is unprincipled incrementalism.

In the modern American context, any deep reform of education must be achieved over a span of many years. I advocate, primarily, making the intellectual case that individual rights (including rights to one’s own wealth) apply in the field of education. This involves many concrete political strategies, including fighting tax hikes for education, phasing in means testing (with lower taxes), and supporting real market alternatives. I do not advocate merely making a few marginal reforms and then giving up, as LaFerrara seems to assume, but instead systematically building on previous reforms until attaining a completely free market in education.

Tax credits in any sort of ambitious form could only be achieved through a long-term political battle as well. But my worry is that the fight for tax credits will ultimately undermine real liberty in education, precisely because they entrench the notion that government properly forces wealth transfers.

LaFerrara, then, basically misunderstands my position when he claims I seem “content to stop well short of taking the political offensive.” I’m all about taking the political offensive! (I do not personally want to spend my life specifically on reforming education, though I’m pleased to spend some of my time doing that and supporting the efforts of others.) I simply wish to avoid mistaking the “political offensive” for a circular firing squad (i.e., a strategy that ultimately undermines rather than achieves individual rights and economic liberty).

Because LaFerrara confuses the relationship between principles and incrementalism, he misattributes to me positions I do not hold, and he advocates one policy that clearly violates rights. He suggests that, by the logic of my argument, I should also oppose such “incremental” reforms as Health Savings accounts and a flat[ter] tax. But that’s just not so: I advocate both those reforms precisely because they unambiguously move us toward liberty. But LaFerrara also throws mandatory savings accounts in the mix of allegedly “incremental ‘free market reforms'” — even though those unambiguously move us in the direction of greater statism.

The essential in evaluating a political proposal is not whether it is incremental or far-reaching or whether it is implemented slowly or quickly. Those are contextual and strategic matters. The essential is whether it in fact advances individual rights.

So do tax credits advance individual rights? I think the answer is yes, because at least they expand the individual’s control over his own resources. But they still mandate the money be spent in a very narrow way (for education). The real risk is that tax credits will become yet another tool for Republicans to basically argue, “Forced wealth transfers? Of course I’m for that! I advocate a massive welfare state! Only I do want individuals to have a bit more choice within the context of the government setting the basic terms.”

The Inherent Controls of Tax Credits

LaFerrara’s basic case is this: “Once the choice of how their education dollars can be spent is relegated to the taxpayer, we will be closer to the day when it will be politically feasible to question why he or she must be forced to pay any government-mandated sum.”

I think that could be the case, so long as advocates of tax credits keep focused on the underlying principles. (I note merely that practically all conservatives who advocate tax credits systematically ignore those principles.) If the advocates of tax credits treat them as a means toward achieving liberty, rather than an alternative way to forcibly redistribute wealth, then they may well do some good ultimately.

Unfortunately, LaFerrara largely misunderstands my point about the inherent controls of tax credits. The whole premise of tax credits is that politicians will force you to finance education, only you get much more leeway in how to do that. But obviously there will be limits. As I’ve pointed out, tax credits for “My Family’s Vacation to Disneyland” or “The School for Satanism and the Occult” or “The School for Shopping at the Mall” would be politically rejected. What is allowable and what is forbidden will depend on how a particular tax credit proposal works itself out in a legislature and court system. I predict that any actual tax credit system will in fact place very tight controls on how the money is spent.

LaFerrara points out that free-market elements of the economy routinely fall under increased political controls, too. But this misses the fundamental difference. In the market segment, the default is that the individual owns his own resources, and the government then overrides his rights for some alleged greater good. With tax credits, the default is that the individual does not own the resources in question, and the government is merely setting limits on how to allocate the government’s money. With tax credits, the default and the inexorable condition is control.

The idea that that an actual legislature would institute a universal tax credit program with absolutely no controls is pie-in-the-sky, rationalistic, detached-from-reality, utopian thinking.

If you think advocating tax credits will open people’s minds to the idea that they actually own their own wealth, then I wish you well in that endeavor. But, in the interim, let’s recognize tax credits for what they are: political controls on how people spend their money.


Anonymous published the following comment on August 20, 2011 at 10:24 AM:

Hi Ari,

An amendment to abolish Federal, taxation collection and taxation expenditure, for education purposes.

An amendment to abolish State, taxation collection and taxation expenditure, for education purposes.

Ari, when and where are you collecting signatures?

When will your Representatives present these measures?



Mike LaFerrara posted the following comment on August 21, 2011 at 5:24 AM:


I appreciate your attention to this subject. Most of what you’ve said here I have already answered in my 8/11/11 post, and I refer the reader to that:

But, let me state that we are in complete agreement in regard to principled incrementalism. There is no confusion in my mind about “the relationship between principles and incrementalism”. That was the main point of my recent essay. However, people who agree on basic principles can differ widely on their application to practice – ex. personal accounts within SS.

Yes, they are government-enforced savings. But, what we have today is forced redistribution backed only by hollow promises of old-age benefits, rescindable at any time by congress ( At least the taxpayer would have possession of, and a right to, his/her own money, rather than the politicians. I consider SS personal accounts to be a step toward individual rights, especially property rights – preferably without, but even with, basic investment controls. They can be advocated as a step in the phase-out process. Personal SS accounts are consistent with your statement that “tax credits advance individual rights … because at least they expand the individual’s control over his own resources.” Incremental reforms must certainly be anchored to explicitly proclaimed principles, lest we advance statism. On that we agree. As I’ve said before, I have yet to see an education tax credit program that meets the test of (free market) principled incrementalism – certainly not ones advocated by conservatives and Republicans!

This brings me to my “misunderstandings” about your positions. Any assumptions I’ve made are rooted in my analysis of things you wrote. Without going into too many details, let me just say in my defense that, as you acknowledge, your tax credit position is ambiguous. I’m still not clear on exactly where you come down on them. Your strenuous objections in your last piece seemed to preclude any support for tax credits, yet now you say you’d support “a decent tax-credit proposal”. Here we seem to agree again: A properly structured tax credit program would be a step in the right direction. What would a “decent proposal” include, in you view? Otherwise, I think you confuse “misunderstandings” with disagreement, such as on the issue of “inherent controls of tax credits”. If – and I can’t resist repeating myself here – “a universal tax credit program with absolutely no controls is pie-in-the-sky, rationalistic, detached-from-reality, utopian thinking”, then how on earth can anyone believe that “an actual legislature would [ever] institute” the complete separation of education and state?

By the way, what do you mean by “phasing in means testing (with lower taxes)” as one of “many concrete political strategies”?

Best to all,
Mike “Zemack” LaFerrara