Wednesday, June 19, 2024

Private school tax credit is ‘charitable facade’ for the rich, study says

by BIZ Magazine

By Wes Muller, Louisiana Illuminator

A new study found that Louisiana’s private school voucher tax credit is siphoning money from public education and serving as a tax shelter for the wealthy rather than encouraging charitable donations. 

In a report published Tuesday, the Institute on Taxation and Economic Policy analyzed various school voucher tax credits in multiple states and found them to be a “charitable facade” that allows wealthy families to opt out of paying taxes for public education and other public services.

According to the study, 99% of Louisiana’s school voucher tax credits go to families that earn more than $200,000 per year. The analysis used Louisiana Department of Revenue data on the state’s Tuition Donation Credit Program, which was designed to encourage donors to contribute to school tuition organizations (STOs) that help low-income families pay for private schools.

The name of the program is a misnomer because the money for tuition is not actually donated, the Louisiana Budget Project’s Jan Moller said.

“There’s nothing charitable about it from the giver,” Moller said. “It’s not a donation at all because every dollar goes back to where it came from.”

Louisiana gives a dollar-for-dollar tax credit when a person or a company gives money to an STO. In other words, Moller explained, wealthy individuals and corporations are pretending to donate but are actually getting 100% of that money back when they file their tax returns. 

Such a scheme, which lawmakers created in 2017, forces the cost of private school onto Louisiana taxpayers by redirecting public dollars that normally go to public education, he said. 

It is expected to cost taxpayers roughly $14 million this year on top of other tax breaks for private school tuition that total roughly $33 million, according to Louisiana’s Tax Exemption Budget. 

Although roughly 45% of K-12 students statewide are eligible to receive school vouchers, less than 1% of them participate in the program, according to EdChoice, an organization that advocates for voucher programs.

Similar policies are on the books in 21 states, and further proposals to create or expand them are being discussed in other states. 

Moller pointed out that private school voucher tax credits elevate STOs above every other charitable organization. Charitable gifts to other causes save taxpayers less than 10 cents in state taxes for every dollar donated, while voucher tax credits offer a 100% return, the study said.

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