Arizona Tax Credit Law Shortchanges Educational Needs Of Disadvantaged Students

FOR IMMEDIATE RELEASE: September 17, 2001

Contact: Nathan Richter or Tracy Duckett at PFAW Foundation

Email: [email protected]

Phone Number: 202-467-4999

Neas Calls Law “Cruel Shell Game” That Shifts Funds Away From Poor

WASHINGTON – In the wake of a series of political setbacks, school voucher advocates are rethinking their strategy. Eager to hitch their wagon to a new star, many voucher proponents are now embracing tax credits for private school tuition—as reflected by a forum being held by the Cato Institute to promote Arizona’s tuition tax credit law as a model. However, a new report by People For the American Way Foundation (PFAWF) shows that the Arizona law is a model for seriously undermining public education, particularly the public schools that serve poor children.

The PFAWF report, A Model To Avoid: Arizona’s Tuition Tax Credit Law, examines how the 1997 Arizona law has cost taxpayers more than $55 million, money that has gone largely to subsidize education for middle- and upper-income families in both private and public schools. By contrast, low-income families who pay fewer taxes do not benefit from the tax credit. In fact, the tax credit depletes state funds, making less money available for needed improvements in public schools that serve low-income and disadvantaged students.

“For voucher supporters, tuition tax credits are old wine in a different bottle. They are just another way to drain tax dollars from public schools that depend on these critical funds,” said PFAWF President Ralph G. Neas. “Arizona’s law is a cruel shell game that shifts money to middle- and upper-income families and away from those who need it the most.”

The Arizona law provides a dollar-for-dollar, state income-tax credit up to specified amounts for two types of expenditures—one for donations made to private scholarship organizations, and one for donations to support extracurricular activities of public schools. Most other states do not have tuition tax credit laws, although efforts to promote them are under way across the country.

A Model To Avoid demonstrates how both aspects of the Arizona tax credit law divert significant resources away from programs that could otherwise support and strengthen public education for poor and disadvantaged students.

The release of A Model To Avoid coincides with a forum being held Monday afternoon by the Cato Institute to promote the Arizona law as a model for education reform. In a statement about the forum, Cato points to the Arizona tax credit law as a vehicle for “students [to] use the scholarships to transfer from public to private schools.” However, the PFAWF report notes that a large share of the scholarships distributed by School Tuition Organizations (STOs) have gone to those families whose children were already enrolled in private schools.

Ironically, while many supporters of vouchers and tuition tax credits have called for tougher accountability for public schools, Arizona’s tuition tax credit scheme is severely lacking in accountability. For example, the state collects very little information from STOs. As a result, in its report on 1998 tax credits, the Arizona Department of Revenue could verify only 53.8 percent of the 6,400-plus tuition tax-credit claims.

As pro-voucher groups devote more of their energy to backing tuition tax credits, they are likely to stay “on message” with their often-heard view that such an approach expands educational opportunity for poor children. Yet, even state officials in Arizona dispute this claim. In fact, for a news story last year, the Arizona Republic interviewed a spokeswoman for Arizona’s governor who readily admitted, in the newspaper’s words, that “it is mostly middle-income families whose kids already are in private schools who are taking advantage of the program, not the poor kids supporters claimed it would help.”

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