The Rich Get Richer under Tax Credits-Public School Tax Credits that is

May 5, 2015 by

by Matthew Ladner –

Arizona passed individual scholarship tax credit donations for children to attend private schools, and for public school extracurricular activities, in 1997. Since that time the newspapers have felled many trees and spilled much each printing columns and letters bewailing the injustice of the private side credits- they are destroying public education, they are going to help rich people send their kids to private school, they are engaged in dark rites to bring Cthulu back into our plane to wreak his horrible revenge on all living things, etc.

This is all nonsense of course– but I think I see now the origin of the “mostly benefiting the rich” narrative- projection. Benefiting the rich far more than the poor is in fact precisely how the public school credit operates. The public school credit goes to support sports, arts, field trips and all of the various things that Jay has been researching lately. The Center for Student Achievement very helpfully crunched the numbers in Arizona Department of Revenue reports and found the following:

So if you are having to squint at your Ipad, the chart has data from both 2005 and 2013, and calculates tax credit revenue by quartile of public school- from the poorest schools (75% and up FRL) to the lowest (< 25% FRL). In 2005, the poorest schools raised a meager $14 per child in tax credit donations, while the wealthiest raised more than 4 times as much at $57 per child.

By 2013, the poorest schools raised a smidge more per student ($16) which is not enough to keep up with inflation. Meanwhile, out in the leafy suburbs, schools collected $96 per pupil. Thus the gap went from $4 for rich kids for every $1 for poor kids, to $6 for rich kids for every $1 for poor kids.

Hmmmm…so the public credit gives to the most to the kids who have the most, gives the least to the kids who have the least.

Well the private school credit might be even worse! Except, it isn’t. All of the corporate scholarship tax credit money is means-tested in Arizona, and some of the individual credit is as well. Even among the individual tax credit money that is not means tested de jure is means tested de facto by the Scholarship Tuition Organizations (STOs). Page 49 of this Arizona Department of Revenue report shows that 70.4% of the original individual tax credit funds (the non-means tested program) go to students with a family income (family of four) of less than $79,000 and 38% of that goes to families making less than $45,000. All of the rest of the money goes to either low/middle income or kids with disabilities.

In fiscal year 2013 STOs raised about $108m from all credits, and we can safely estimate that between 80% to 90% of scholarship funds went to low and middle-income children, which beats not only the stuffing out of the public school credit, but also out of AZ public school system’s spending overall.

Source: The Rich Get Richer under Tax Credits-Public School Tax Credits that is | Jay P. Greene’s Blog

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