School choice programs pay off for donors
Are tax benefits too generous?
Dibye Bass’ 12-year-old son, like thousands of children, has benefitted from a school choice program championed by the Trump administration that offers big-money donors tax breaks which critics say are too generous.
Bass’ son was bullied in a Virginia public school and a scholarship tax credit program was his way out and into a private school that the single mother said has made a difference in her son’s life. Regardless of questions raised about the way the programs are financed, she said she is grateful.
“I see it as something that encourages you to give more. Not just for a tax break but because you’re doing something good,” she said.
But here’s what’s unusual, if not controversial, about the scholarship programs: Wealthy donors can potentially “profit” from their contributions through extensive tax benefits that can drain money from state treasuries which fund public services — including public schools.
The programs are available in 17 states and are being considered by legislators in several others. They are praised by Secretary of Education Betsy DeVos — a longtime school choice advocate — and are the focus of two congressional bills that seek to create a federal version of the program.
All the programs basically work this way: Individuals and businesses make cash or stock donations to scholarship granting organizations. The organizations award scholarships to qualifying families with K-12 students, primarily children in failing public schools or whose families' income meets the state’s poverty threshold. Students can then attend a private or religious school of their choice. What makes these programs unique is that donors get a full or partial credit toward their state taxes, which they are not allowed when donating to most other charities, and this allows them to realize a sizable tax advantage when combined with a federal deduction on the same gift. Plus, in some states, donors also get a state deduction.
“What these scholarship tax credits do is they super charge that incentive up to 100 percent of the amount donated,” Carl Davis, senior tax expert with the Institute on Taxation and Economic Policy, said. “And in the right set of circumstances, they’re receiving more back in tax breaks than they ever donated in the first place. … They’re able to claim a state tax credit and a federal deduction on a single donation and this is often profitable for them to do so.”
Davis’ organization released a report last month in conjunction with the School choice programs pay off for donors - Longform Story:
