Tax credits for private-school scholarship donations: Yes, Indiana has them

The New York Times reported this week on abuses in state programs that provide generous tax breaks for donations that fund scholarships for private K-12 schools.

The article, which focused on Georgia, Pennsylvania and Arizona, said the programs were created to “help needy students escape struggling public schools.” Instead, they’ve turned into a way for religious schools to milk the public treasury, often to benefit families who could afford tuition without help.

“This school year alone, the programs redirected nearly $350 million that would have gone into public budgets to pay for private school scholarships for 129,000 students, according to the Alliance for School Choice, an advocacy organization,” the Times says.

The article says eight states have programs that provide tax credits for donations that are funneled to private schools through nonprofit “scholarship granting organizations.” And yes, Indiana is one of them.

Indiana’s tax-credit scholarship program is small and limited to low- or middle-income families. On the other hand, Indiana last year enacted the nation’s most extensive voucher program, in which the state – not private donors – gives money to parents to send their children to private schools.

Some of the Christian schools that receive voucher funding in Indiana provide the same A Beka and Bob Jones curricula as the sectarian schools described by the Times, rejecting evolution, teaching that God created the world in six days and presenting a politically biased picture of American history.

The article describes how supporters and operators of the private-school scholarship programs are often deeply involved in politics, including statehouse lobbying and election campaigns. Two of the groups pushing the programs also helped create Indiana’s voucher program: the American Federation for Children and the American Legislative Exchange Council.

According to the Times, Georgia provides $50 million a year in tax breaks through its program, and Pennsylvania distributes $40 million in scholarships. Arizona’s East Valley Tribune reported on problem’s with that state’s scholarship program in 2009.

Indiana’s program, by contrast, is capped at $5 million in tax credits ($10 million in scholarships) per year. According to the Indiana Department of Education, only $1.7 million has been claimed for the fiscal year that ends June 30.

The state’s voucher program, by contrast, spent $16.2 million to send almost 4,000 students to private schools in 2011-12. State law allows up to 15,000 students to receive vouchers in 2012-13 and lifts the cap entirely the following year.

The Indiana tax-credit scholarship is typical in that it provides a 50-percent credit for contributions. In other words, if you give $1,000, you can get $500 back courtesy of the state treasury.

According to a state FAQ on the program, it’s OK to designate a donation for a specific school but not for an individual student, if you want to claim the tax credit. To qualify for a scholarship, a student must be entering kindergarten or have been enrolled in a public school the previous year. Family income can’t be more than twice the level required to qualify for reduced-price school lunch – about $100,000 a year for a family of five.

Indiana also lets parents claim an income tax deduction of $1,000 per child for tuition and other expenses related to private schools or home-schooling.

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