School Choice & Charters

Ariz. Law Grants Tax Credit for Tuition-Aid Donations

By Lynn Schnaiberg — April 16, 1997 3 min read

A new Arizona law will grant taxpayers up to $500 in income-tax credits for donating money to nonprofit groups that, in turn, provide scholarships for students to attend private schools, including religious ones.

The law, which will take effect next year, also offers taxpayers up to a $200 credit for money given to public schools to support extracurricular activities that may require a fee, such as band or sports teams. Republican Gov. Fife Symington signed the measure into law last week.

Opponents of the law call it a back-door voucher scheme, but supporters say it’s a different animal altogether.

One thing both sides seem to agree on is this: School choice proponents have hit upon a new strategy. And the courts likely will decide whether it ultimately proves to be a successful strategy or not.

“This is such a hybrid piece of legislation,” said Joseph Conn, a spokesman for Americans United for Separation of Church and State, a Washington-based advocacy group. “I don’t know of any other plan like this in the country. It’s fiendishly clever.

“But it’s just one more mechanism for the state to encourage religious schooling,” he contended.

Republican state school chief Lisa Graham Keegan defended the measure last week.

“Contrary to current folklore, it does not give a direct tax credit to parents who send their children to private schools,’' the Arizona school superintendent said.

Cost Controversy

Some states allow parents to take tax deductions or credits for private school tuition they pay for their children. Many nonprofit groups provide scholarships for low-income children who otherwise would not be able to afford private school tuition.

But Arizona’s law combines elements of both approaches. It offers an incentive for any taxpayer to make donations to nonprofit scholarship organizations that provide benefits for more than one private school. But it is not limited to parents who send their children to such private schools. In fact, it does not allow parents a tax credit if they designate their donations for the direct benefit of their children. While taxpayers often claim deductions for charitable donations, the Arizona plan offers a dollar-for-dollar credit for the amount of a specific donation.

In arguing that Arizona’s law likely would pass legal muster, proponents point to a 1983 U.S. Supreme Court ruling that narrowly upheld a Minnesota provision granting tax breaks to parents for private school tuition. A federal district judge upheld a similar program in Iowa in 1992. (“Judge Upholds Iowa Tax Breaks for Private-School Parents,” April 1, 1992.)

Opponents of the measure say it would funnel public tax money into private and religious schools.

“It’s just shifting dollars into the private realm. In our mind, it’s a voucher,” said Mary Kay Haviland, the director of government relations for the 30,000-member Arizona Education Association.

Arizona education groups are likely to challenge the measure and may try to go to the voters to nullify the law through a referendum on the 1998 ballot.

Estimates of the new law’s costs to the state in lost revenue are fiercely disputed. The state department of revenue “conservatively estimated” the potential cost at $50 million a year initially, then lowered the amount to $30.5 million to reflect potential state savings when students move from public to private schools. Opponents say it could cost much more, while supporters say it could cost as little as $10 million a year.

Meanwhile, Jack E. McVaugh, the president of the Arizona School Choice Trust, is still reeling from the possibilities the new law may open. His nonprofit group helps 100 low-income children with private school tuition aid.

“We sure are excited. We’ve been struggling pretty much for four years,” Mr. McVaugh said. “This should change it.”

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