In 2001, Pennsylvania Governor Tom Ridge battled with Democratic state legislators to create a corporate scholarship tax credit program to bring the state’s families school choice. Five years later, Ridge’s tax credit has strong bipartisan support and is a model for other states. And just two weeks ago, Gov. Ed Rendell, a Democrat, signed legislation expanding the program.
The 2001 school choice law offers corporations tax incentives to fund private school scholarships and “school improvement” projects at public schools. Under the law, corporations can claim a tax credit of up to 75 cents per dollar for a one-year contribution and 90 cents for a two-year contribution.
Initially, the tax credit was capped at $20 million for private school scholarship donations and $10 million for public school donations. Since 2001, it has been has expanded, reaching an annual cap of $44 million in 2005.
Businesses have been eager to participate. Last year, contributions hit the cap for private school scholarships just days after tax credits became available, raising $44 million to help 27,000 students attend private schools.
But many more children could receive scholarships if more tax credits were available. In 2005, more than 500 companies were unable to participate because of the cap. Responding to this strong demand, this week Gov. Rendell agreed to support legislation that expands the tax credit program—with a new annual cap of $54 million, the expanded tax credit will pay for thousands of additional scholarships.
Gov. Rendell’s support demonstrates growing bipartisan support for tax credit-based scholarships. Last month, Republican gubernatorial candidate Lynn Swann proposed doubling the cap for corporate contributions to Pennsylvania’s scholarship program. Gov. Rendell’s office responded by pointing to the governor’s record of raising the cap in 2003 and 2005.
Across the country, corporate scholarship tax credits have become a popular way to expand school choice. The