Sunday, January 06, 2013

Endless Chatter

The 2013 AEA San Diego meetings are now over.  To paraphrase Keynes,  "We had joy, we had fun, we had seasons in the sun."     Over the last 3 days, while my son went to the zoo and the Midway Aircraft carrier, I talked and talked to old friends, new friends, graduate students, bloggers, new colleagues, book press editors, co-authors, future co-authors, past co-authors, 1 Nobel Laureate and 2 past chairs of the CEA.  I am now taking a vow of silence.

While I enjoyed all of these conversations,  one of the most interesting conversations I had was with Dartmouth's Andrew Samwick who told me about his recent NBER Working Paper.       Parents who send their kids to private schools are patriots.

Donating the Voucher: An Alternative Tax Treatment of Private School Enrollment

Andrew A. Samwick

NBER Working Paper No. 18525
Issued in November 2012
NBER Program(s):   ED   PE 

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.