As the Nevada Legislature convenes in Carson City to discuss how to cover the imaginary budget shortfall—imaginary, in that it's a shortfall between the money projected to come in and the 17 percent increase in spending that politicians want—the fate of taxpayers and businesses hangs in the balance.

Reports at this time suggest that leadership aims to double or even triple the Modified Business Tax, a tax on the gross payroll of each business operating in Nevada. If there was ever a tax that punished companies for hiring more people and paying them well, it is the Modified Business Tax. As Nevadans face an unemployment level exceeding 9 percent, eliminating the MBT would be one of the most beneficial policies our legislature could enact. Sadly, however, once a tax is created, it is likely to exist until Armageddon.

But perhaps some good could still be associated with this tax. Nevada's legislature could create a Corporate Tuition Tax Credit Program, allowing Nevada's corporations to donate money to non-profit scholarship tuition organizations (STO) and receive a dollar-for-dollar tax credit up to their statutory obligation under the MBT.

The scholarship organizations, in turn, would award tuition grants to low-income students (students who are eligible for free or reduced lunches), allowing them to attend private schools or out-of-district public schools. A similar program, called Step Up for Students, currently exists in Florida.

Today, that Florida program provides scholarships to more than 23,000 low-income students—of whom more than 70 percent are minorities. The vast majority of parents whose children receive scholarships in Florida are extremely pleased with the program, while many of the children are seeing significant new progress in their education.

Not only does the program help disadvantaged children receive a better education, but Florida estimates that it saves the state $1.49 for every $1 in tax credit awarded. That added up to about $42 million over the last year.

While helping low-income and minority children receive a better education is an admirable goal, Nevada doesn't have to stop there. Andrew Coulson, a scholar at the Cato Institute, a Washington, D.C.-based think tank, recently conducted a study on the fiscal impact that a universal Public Education Tax Credit Program would have on Nevada.

The Public Education Tax Credit Program combines credits for donations to nonprofit scholarship organizations serving low-income families with credits for parents who directly assume the cost of their own children's education. The tax credits were even adjusted for family income so that low-income families receive the largest tax credits.

The program provides a strong incentive for public schools to increase performance, because when students transfer to private schools, state appropriations follow the student. However, since local funds would remain to help educate fewer students, per-pupil expenditures actually increase. Mr. Coulson estimates the program would save Nevada between $590 million and $1.3 billion over the next 10 years. After 20 years, the program would be saving Nevada more than $500 million each year.

The Public Education Tax Credit Program improves education quality, helps low-income children attend higher quality schools, increases per-pupil funding to public schools and saves the state money in the long run. What's not to like?

Whether it is a universal Public Education Tax Credit Program or a Corporate Tuition Tax Credit Program that Nevada ultimately chooses, we will then be working to provide true equality of opportunity in education to Nevada's most disadvantaged children.

Patrick R. Gibbons is an education policy analyst at the Nevada Policy Research Institute. This article originally appeared in the March 2009 edition of the Nevada Business Journal.