Tax Credits and Education Reform: No Simple Task

Over the last decade, the state of Arizona has made ground-breaking attempts at K-12 education reform.  A 1997 law allowing taxpayers to steer a portion of their state income-tax liability toward a student at a private school now provides significant scholarship aid each year to 22,500 of the 54,000 students enrolled in private schools.  With over one million of Arizona’s students still in public schools, however, the results of the movement are difficult to measure.

Incorporated by the state and regulated by the federal government’s 501(c)3 tax-exemption rules, School Tuition Organizations (STOs) have thrived and multiplied into a battalion of 54 organized nonprofit businesses in less than a decade.  Unlike vouchers or government subsidies for low-income families, privately run nonprofit STOs solicit their own donors, rather than rely on a handout from the state.  Before they can fund a single child’s scholarship, they have to persuade individual donors to make a significant contribution and to take a credit on next year’s taxes, which is no simple task.

What began in 1997 as a $500 tax credit has now grown to a maximum of $1,000 per year, which a taxpayer can donate to the organization of his choice, then take as a dollar-for-dollar credit against his state income-tax liability.  (Arizonans have five years to apply the credit to their state tax bill.)  In 2005, almost...

Join now to access the full article and gain access to other exclusive features.

Get Started

Already a member? Sign in here