The U.S. Supreme Court last week agreed to consider the politically volatile issue of state tax deductions for the parents of private-school children in a case that involves many of the constitutional questions raised by the federal tuition tax-credit bill pending before the Congress.
In orders issued as it began its new term last week, the Court also: agreed to consider a case involving the Education Department’s authority to collect Title I funds that were misspent by several states prior to 1978; refused to review race-based teacher layoffs in Boston; and refused to review school-desegregation cases involving North Little Rock, Ark., St. Louis, and suburban Pittsburgh. (See Page 9 for these and other cases.)
The tax-deduction case, Mueller v. Allen, No. 82-195, involves a 27-year-old Minnesota law that extends state income-tax deductions of up to $700 to parents for educational expenses. Allowable expenses include tuition, transportation, nonreligious textbooks, and supplies.
The law covers expenses incurred at nonprofit schools that comply with state educational standards and federal civil-rights laws, as well as fees and other expenses incurred in attending public schools but not paid for by the local school district.
Taxpayers Challenged Law
A group of Minnesota taxpayers and organizations, led by Van D. Mueller, a professor of education at the University of Minnesota, challenged the law. They argued that 95 percent of the children whose parents claimed tax deductions for tuition attended sectarian schools and that the program’s benefit to public-school students is “extremely minimal.” The suit has been supported by the Minnesota Federation of Teachers and by the American Civil Liberties Union (aclu), among other groups.
In a brief filed with the Court, the state of Minnesota argues that if all public-school parents took the school-related tax deductions to which the law entitles them, “the total revenue loss ... could easily equal and potentially dwarf that due to all types of deductible expenditures by sectarian school students.” Thus, the state argues, the statute does not single out a religious class for the benefits.
The U.S. Court of Appeals for the Eighth Circuit found in April that the Minnesota statute did not violate the Establishment Clause of the Constitution, in part because the tax benefits are available to families whose children attend public schools. That decision conflicted with a 1980 decision by the U.S. Court of Appeals for the First Circuit, which invalidated a similar Rhode Island law.
Many legal analysts believe that the Minnesota case has implications for the federal tuition tax-credit legislation recently approved by the Senate Finance Committee.
“As [the federal legislation] has been described to me, it seems indistinguishable in relevant respects” from the Minnesota law, said Charles S. Sims, an aclu lawyer who is working on the case. “The purpose and effect would be largely to support the education of children attending religious schools.”
The Education Department is “watching the case,” said Gary Bauer, deputy under-secretary for planning and budget. “We obviously have an interest in how the Court ends up coming out on it. ... We will be watching the ruling to see if there are any dicta [nonbinding observations] which might bear on the national debate.”
Sources in the Education and Justice Departments said they do not know of any plans for the federal government to become involved in the case, but pointed out that the government has at least two months to decide.
“In my experience, it is not likely that the government would take part in order to shore up what is only a proposal rather than a federal statute,” said a high-ranking Justice Department lawyer who asked not to be identified. “It would be different if the Congress had already passed it. But I know the Administration feels very strongly about it, and if the White House asks the Attorney General to get into it, we’ll get into it.”
A Congressional aide involved in the tax-credit legislation, who asked not to be identified, said that if the Supreme Court affirms the Eighth Circuit’s opinion, “It would help, but not definitively decide the constitutionality of the federal statute. It would be a step in the right direction. If they found it unconstitutional, it would indicate they would go the other way on [the federal bill].”
But Edward M. Gaffney, a professor of constitutional law at the University of Notre Dame, said last spring that a Supreme Court ruling on state tuition tax deductions would not necessarily indicate the Court’s position on the federal tax-credit plan. The Court, Mr. Gaffney noted, “rarely second-guesses Congress” on tax matters.
The Supreme Court, in a series of cases, has established a “three-part test” for determining whether a law violates the constitutional prohibition against establishment of religion: the law must have a secular legislative purpose; it must not promote or inhibit religion as its “primary effect"; and it must not promote excessive government entanglement with religious institutions.
The Court’s key precedent on state tax benefits to the parents of private-school students came in 1973, in a case called Committee for Public Education and Religious Liberty v. Nyquist. In that case, the Justices invalidated a New York law providing state income-tax deductions because they were extended only to families with children enrolled in private schools.
Furthermore, the Justices said, the New York provision amounted to a tax credit because the deduction was a fixed amount not directly tied to tuition costs. But the Court in the Nyquist case reserved judgment on the constitutionality of a “genuine” tax deduction representing a proportion of actual educational costs.
The Eighth Circuit last spring distinguished the Minnesota statute from the New York provision on those two grounds.
“It seemed to be very important to the Eighth Circuit that there was no special class, religiously oriented, that benefited” from the Minnesota program, said Philip Morrison, counsel to the Senate Finance Committee.
“Those distinctions are not present in HR 1635 [the federal tax-credit legislation now before the Congress]. “It is a credit, and it does not apply to public-school students.”
Mr. Sims, the aclu attorney, said that the Court will hear oral arguments in the Mueller case sometime after February.
