Blog Posts > Scholarship Tax Credits Share the Same Flaws with Education Savings Accounts
May 6, 2019

Scholarship Tax Credits Share the Same Flaws with Education Savings Accounts

With this month’s Special Session on education reform looming, Speaker Hanshaw has floated the idea of replacing one controversial policy proposal, Education Savings Accounts (ESA), with another, tax credit scholarships.

Like ESA’s, tax credit scholarships are another voucher-like policy that create financial incentives for students to leave the public school system and enter into the private school system. While ESA’s simply provide a public stipend to help pay for private school tuition for students leaving the public school system, tax credit scholarships are more complicated, while aiming for the same goal.

Tax credit scholarships allow individuals and corporations to allocate a portion of their owed state taxes to private nonprofit scholarship-granting organizations. The organization then can issue scholarships to K-12 students. The scholarship allows a student to choose among a list of private schools, and sometimes public schools outside of the district, approved by the scholarship organization. The scholarship is used to pay tuition, fees, and other related expenses.

Speaker Hanshaw claims that unlike ESA’s, tax credit scholarships do not affect public education funding, but that is not the case. First, tax credits affect the state budget just the same as spending. Tax credits are simply spending by another name. Every dollar given in the form of a tax credit has the same impact on the state budget as a dollar spent.

Also, since public education funding is based on enrollment, encouraging students to withdrawal from the public school system and into the private system has an impact on public school finances. Moving students from public to private schools is a financial blow to public school districts. While the individual costs of the student are no longer a factor, school districts cannot reduce their fixed facilities and transportation costs in proportion to the number of students who leave, yet are left with less funding to do so.

Also, just like ESA’s, low-income and rural students would face the significant barriers to using a tax credit scholarship. Urban families are more likely than rural families to live within easy commuting distance of a private school, charter school, or at least two within-district traditional public schools. Families below the federal poverty level are also less likely to live near multiple within-district traditional public schools, a charter school, or a private school than families above the federal poverty level. In West Virginia, 19 counties have no private schools, with 14 more having just one. The private schools in the state are clustered in the state’s more urban and wealthier counties.

Finally, as with ESA’s, there is little evidence that these voucher-type programs are effective at improving education. Recent evaluations of Louisiana and Indiana found students who switched from public to private school through a voucher program lost ground in the first few years, as measured by test scores. For every state that shows progress, another state does not. Students in Florida’s tax credit scholarship program had increased rates of college enrollment, while those in D.C.’s did not. More importantly, there is little evidence that public schools improve outcomes due to competition from private schools generated from voucher-like programs, which undermines the entire rationale for encouraging school choice as a method of education reform.

Like vouchers and ESA’s, tax credit scholarships would do little to improve education for the vast majority of West Virginia students. Education reform should focus on policies with proven track records of success that benefit all of West Virginia’s students, not convoluted proposals to move public funds into the private school system, while leaving out all but a few students who are able to take advantage. Proven policies like high-quality early childhood and pre-k programs, better teacher pay and strengthened training programs and early college courses are all more effective and would benefit all the state’s students.


It should come as no surprise, but from what little data exists about scholarship tax credits show that they overwhelmingly favor the wealthy. According to the Virginia Tax Department, the average participant in their program receives a tax credit of approximately $4,700. But the average is skewed by the large credits received by the very wealthy. Those participants earning less than $50,000/year received an average tax credit of only $820, while those earning more than $2,000,000/year got a tax credit averaging $54,000. In addition, 80% of the tax credit recipients earned more than $100,000 per year, while nearly 43% of the total credits went to participants earning more than $1,000,000 per year. Less than 1% of the total value of the credits went to those earning less than $50,000.

Donate Today!
Icon with two hands to donate today.

Help Us Make West Virginia a Better Place to Live

Subscribe Today!
Icon to subscribe.

Follow Our Newsletter to Stay Up to Date on Our Progress