When my wife and I bought a house recently, we narrowed our choices to two. Like many families, our decision came down to the quality of the local schools. One of the homes was in a neighborhood with schools at the top of the state’s assessments; the other had mediocre schools. Not surprisingly, the first house had a higher price and higher real estate taxes.
We decided to buy the more expensive house. But the extra cost will not be borne by us alone. Come federal income tax time, we’ll receive a heftier refund from our mortgage interest and real estate taxes deduction. In other words, taxpayers across the nation will be subsidizing our choice of a better school for our children—to the tune of $138 billion in aggregate tax benefits.
This is the largest school choice program in the United States. It’s a nice deal if you can get it—but you have to be wealthy enough to itemize your taxes. The higher your mortgage and the greater your real estate taxes, the bigger the subsidy. It’s a system so sacrosanct that no politician would dare question it.
By contrast, economically disadvantaged families always encounter ferocious opposition when they try to secure school choice. That is so, despite poor inner-city schoolchildren’s tremendous educational deprivations. The high school graduation rate for blacks and Hispanics hovers barely above 50 percent. Black students who manage to graduate perform on an average of four academic years below their white counterparts.
School choice programs in Milwaukee, Florida, and elsewhere have boosted academic performance and expectations for poor students. They have also exerted competitive pressure on public schools to adopt long-overdue reforms and improve.
One prominent school choice advocacy group, the Black Alliance for Educational Options (BAEO), has adopted as a mantra that school choice is widespread, unless you’re poor. Middle-class and wealthy families have the means to choose neighborhoods with good public schools or to send their children to private schools. Tens of millions choose where to live because of the quality of nearby schools, something people of lesser means cannot do.
Critics say rich people have a lot more of everything of value than the poor. And if they choose ritzy neighborhoods to gain access to good schools, they’re paying for it, unlike the poor who demand school vouchers. That’s not exactly true. The federal income tax system operates as Robin Hood in reverse, subsidizing wealthier taxpayers at the expense of less-affluent Americans. Among those Americans who itemize their taxes—less than one-third of those who file tax returns—the average taxpayer receives a $9,607 deduction for mortgage interest. Add an average deduction of $2,645 for real estate taxes for a total of $12,252—more than $4,000 in reduced taxes for higher-income earners (even after accounting for the alternative minimum tax). That is $1,000 more than the average aid provided through school choice programs for poor children—the same programs that are stingily resisted by many wealthy suburbanites who could not possibly afford their homes without massive federal income tax subsidies.
The windfall grows much higher in certain states and for the truly rich. In New Jersey, the average taxpayer moving to a wealthy school district receives a total deduction of nearly $15,000. In California, the average combined mortgage and real estate tax deduction is $16,728. Ironically, there are no school vouchers for poor kids—or serious political prospects to secure them—in either state. One of the more lavish subsidies goes to Washington, D.C., millionaires, who take an average combined mortgage interest and real estate deduction of $125,763. Many of those rich Washingtonians use their tax breaks to send their own kids to elite private schools—while at the same time opposing vouchers for poorer families. New Yorkers receive bigger-than-average tax breaks, deducting more than $14,000 for mortgage interest and local taxes. New York millionaires claim an average $134,000 deduction for mortgage interest and property taxes.
In all, the mortgage interest and property tax deductions total $356.5 billion—roughly $138 billion of which is returned to affluent taxpayers. By contrast, existing school choice programs for low-income children total $254 million, roughly $3,054 for each child using choice to attend private schools. The answer is not to end school choice subsidies for the rich—but to extend them to the poor.
BAEO might well change its motto to “government-subsidized school choice is widespread—unless you’re poor.” It’s a shame that poor schoolchildren must continue to suffer from their lack of school choice—while wealthy Americans who enjoy school choice while opposing it for others fail even to acknowledge their rank hypocrisy.