CURMUDGUCATION: The $5 Billion DeVos Money Laundromat

CURMUDGUCATION: The $5 Billion DeVos Money Laundromat

The $5 Billion DeVos Money Laundromat

You have read by now that Betsy DeVos is finally going to get one of her favorite policy ideas floated past Congress. But what the heck is it, and why is it a problem? To understand, we have to look first at what's been happening in some states.

The financial device we're talking about is a Tax Credit Scholarship, and it's a bit of a clever dodge.

Let's say I'm the State of New West Virkota. The state would like to collect a tax of $100 from Bob and give it to Come To Jesus Academy, but there are rules in place that say that the state can't give taxpayer money to a private religious school. So instead, the state tells Bob that he can give $100 to the Good Neighbor Scholarship Fund instead of to the state, and then the Good Neighbor Scholarship Fund can spend the $100 to pay tuition for some child to attend Come To Jesus Academy. It is a transaction not unlike money laundering, or a fifteen year old paying a college kid to buy beer for him. In Georgia, your contribution can be earmarked for a specific school where "the funds will be equally divided among all approved, eligible students." So, yeah-- it's a donation  to the school, not a scholarship for a student. Georgia can't give Bob's tax dollars to a private religious school, so it just gives Bob credit for giving the money for them.

And it's not just the shadiness of skirting the law. In some states, like Virginia, by leveraging state and federal deductions and credits, you can actually make a profit on your contribution. Here's a wealth management firm explaining how to turn $10,000 into $10,960. The definitive research on just how crazy this stuff gets has been done by Carl Davis of the Institute on Taxation  Economic Policy (his name appears in virtually every article that has been written about the Trump-DeVos proposal). Here's a whole paper, or you can catch him in an informative interview here; I advise you to be sitting down while you're reading it. According to Davis, ten states have that little profit quirk, and they aren't shy about saying so:

"When you donate, you will receive both a Georgia state tax credit AND a federal charitable CONTINUE READING: CURMUDGUCATION: The $5 Billion DeVos Money Laundromat