Yesterday, WaPo’s Valerie Strauss accused scholarship tax credit (STC) programs of operating as Reverse Robin Hoods, robbing from the poor to give to the rich.
Call it welfare for the rich. Why? Wealthy businesses and individuals are the folks who get the tax credits for putting up the cash to pay the tuition. Furthermore, the amount of money for tuition made available for tuition by private scholarship organizations often does not actually cover the full cost of attending a private school. Poor families can’t make up the difference. Guess who can.
The reality is almost exactly the opposite. Donors are not benefitting financially at the expense of the poor or anyone. And while it is true that tax-credit scholarships do not always cover the full cost of tuition at private schools, thanks to low-cost options and needs-based tuition breaks, low-income families are the primary beneficiaries of STC programs.
STC Donors Do Not Benefit Financially
It is odd to claim that “wealthy businesses” are financially benefitting by receiving a tax credit for their donations. Even a 100% tax credit means that they are simply no worse off than before. A corporation with a $10,000 tax liability that made a $10,000 donation to a scholarship organization would then owe no state taxes but it would still have $10,000 less than it did before. Whether the $10,000 went to the government or a nonprofit is irrelevant to its bottom line.
Moreover, Strauss fails to mention that most state STC programs do not grant 100% credits. In fact, only four of the fourteen STC programs do. The other credits range from 50% to 90%. In these states, corporations would be better off financially if they merely paid their taxes.
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