Getting on the Same Page Regarding Tax Credits

Getting on the Same Page Regarding Tax Credits

From time to time I encounter private school leaders who tell me they oppose the idea of education tax credits because, “it takes money away from the public schools.” Some time ago I developed a standard response to such statements. It begins with the following question: “If you were approached by a very wealthy donor who expressed a desire to contribute $10 million to your school’s capital campaign, would you insist that acceptance of the gift be conditioned upon the donor’s promise not to take a tax deduction for the amount of the contribution?”

Some immediately “get it.” Others require the following explanation: If the donor takes the deduction, he/she is ‘taking money away from the public schools’ (and you certainly wouldn’t want that!). I am always tempted to add something to the effect that it’s OK to ‘take money away from the public schools’ if doing so will help build a new swimming pool on your campus, but not so much when doing so may help a child from an impoverished family access somebody else’s school.

There are two reasons why I bracketed the expression ‘take money away from the public schools’ in single quotes. The first is that the putative diminution of government revenue doesn’t necessarily dictate a corresponding depletion of funding for public education. We the People – at least those of us residing in California – are currently servicing the debt on nearly $10 billion of bonds issued to finance the building of a high speed rail line running through the Central Valley. If, on average, the state is paying 1.5 percent to service that debt, we’re talking $150 million, a year (for just the train). That’s more than enough money to offset multiple years of sensibly crafted education tax credit legislation that could actually leverage private investment in the education of the public.

The second reason is more fundamental. The money in question is not the government’s. It’s ours. One might argue that in acting in such a manner as to provide a tax credit the government is forgoing revenue it could otherwise have realized. The same, however, could be said of all income earned by taxpayers. That the government is not currently taxing me at a rate that is 50 percent higher is not to say that the government is losing revenue.

That’s not just me talking. It’s the U.S. Supreme Court, which, in its 2012 Arizona Christian School Tuition Organization v. Winn decision, dispels the supposition that “all income is government property, even if it has not come into the tax collector’s hands,” asserting that such a view “…finds no basis in standing jurisprudence.”

The same Supreme Court decision does more. It provides a rationale for differentiating education tax credit arrangements from school vouchers. In the Court’s words:

“When the Government spends funds from the General Treasury, dissenting taxpayers know that they have been made to contribute to an establishment in violation of conscience. In contrast, a tax credit allows dissenting taxpayers to use their own funds in accordance with their own consciences.”

In other words, in a school voucher arrangement – in which government funds are expended – a taxpayer might complain that he/she doesn’t wish for “his/her tax dollars” to ultimately find their way to a school that exists to promulgate beliefs he/she finds objectionable. A tax credit arrangement obviates this objection because no government expenditure of funds is involved.

A critic might, nevertheless, declare that it is only for the incentive established by the availability of a tax credit that individuals make their voluntary contributions in the first place. The government, they might argue, is therefore providing an incentive that has the effect of advancing religion, in violation of the First Amendment.

This objection, however, has been answered in the U.S. Supreme Court’s prior decision in Zelman v. Simmons-Harris. First, the ruling clearly indicates that religiously oriented private schools can and do fulfill secular purposes. Moreover, the Court found that:

“The incidental advancement of a religious mission, or the perceived endorsement of a religious message, is reasonably attributable to the individual recipient, not to the government, whose role ends with the disbursement of benefits.”

In other words, in choosing to use a voucher to gain access to a religious school, parents are exercising a choice that is independent of the government. Moreover, they could have chosen to use the same voucher to access a private school with a different faith orientation, a private school with a secular orientation, or they could have foregone the voucher, altogether, and opted to enroll their child(ren) in a public school. That some voucher dollars – even when ‘some’ ends up constituting the majority of such dollars – find their way to private schools with religious orientations is an outcome that’s attributable to the independent choices exercised by parents, and not to the government.

If such a finding is true with respect to vouchers – where an actual government expenditure of funds takes place – how much more true ought it be in the case of tax credits, where no government expenditures are involved?!

Education tax credits don’t necessarily take money away from public schools, and can be of substantial benefit to both public and private school students, parents and teachers. If we ever wish to see meaningful education tax credit legislation enacted in California, it’s time we all get on the same page, and begin educating our lawmakers.


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