Wow! This sounds so familiar.
A few years back here in Ontario, a Progressive Conservative leader running for premier had devised a similar idea. If you're not aware, in addition to Public schools we also have publicly funded Catholic school due to our constitution. When we file our taxes we basically get to select which school board we would like our funds to go to - generally speaking, you pick where your kids are enrolled.
Anyway, he decided this clearly wasn't fair. He proposed a third option so that parents who have their children in private religious schools of other faiths would see some public funding.
He was fairly popular and it was expected that'd he win the election easily. But when he proposed this idea on the campaign trail, the polls turned big time. Not only did he lose, but he also didn't even secure his own seat (for those familiar with the parliamentary system).
Apparently, the story goes that the other main political parties (Liberal and New Democrats) proceeded to campaign in areas that were seen to be a shoe-in for the PCs and stress that this proposal would divert public funds to Islamic schools. *gasp* The horror of it.