HYH: Tax Credits for Dummies

I get hugely behind in my podcast listening-- I'm far better at absorbing information through my eyes than my ears, and listening to a full podcast requires a level of attentiveness that I can't always muster. That's unfortunate for me, because every time I finally get around to listening to casts, I end up wishing I'd listened sooner.

Tops on my list of podcast catch-ups is Have You Heard, a cast now in its second season and featuring the team of Jennifer Berkshire and Jack Schneider. Both are long-time knowledgeable observers of the education; Berkshire is one of the best interviewers in the civilized world, and Schneider knows more about the history of education than just about anybody. They share a gentleness and decency that allows them to talk to the most difficult of subjects (check out their conversation with She Who Will Not Be Named)



Their most recent episode is a hugely illuminating look at the world of tax credit scholarships-- one more approach to vouchers that not only allow reformsters to circumvent the law and do some money laundering, but can even result in profit in the bargain.

The episode includes a conversation with Carl Davis of the Institute on Taxation Economic Policy, and Davis provides an explanation that is both easy to follow yet rather alarming. I'm suggesting that you listen to the whole thing, but let me give a short version to whet your appetite.

In most states, laws known as Blaine Amendments (let Schneider explain that whole business to you) make it illegal to give tax dollars to church-related enterprises like, say, a private religious school.

Tax credits are a way around that. Taxpayer Chris owes the state $1,000 in taxes, but once Chris hands that to the state, it would be illegal for the state to give that $1,000 to Wholly Jesus Academy. So Chris gives the $1,000 to WJA Scholarship Fund, the fund gives the $1,000 to the Academy, and the state says, "That's okay, Chris-- you don't have to pay $1,000 in taxes." In fact-- and this is perhaps the most astonishing thing of all, some states give Chris some of the $1,000 back! Chris has now served as the state's bag person by delivering money to a private religious school that the state could not, and in some states, Chris has been paid to do it. This is before we even get into deducting from federal and local taxes.

This is a trick that's popping up in many states (including my own Pennsylvania, where it's known as EITC). The "many states" part is because this is another ALEC-supported idea. Any legislator interested in launching education tax credits can just lift the language from ALEC.

Those are the broad strokes. I encourage you to listen to this podcast in its entirety, because while folks are agitating to keep vouchers from coming in the front door, these neovoucher education tax credits are sauntering in through the kitchen entrance.