I can be convinced either way on charter schools depending on the particular program.
I have a harder time getting on board with voucher programs because no one has explained to me what helpful thing a voucher program does that a charter program doesn’t do.
Tax credit scholarships OTOH seem like a horrible idea.
Here’s how they work.
You donate $100 to a scholarship fund. Your state gives you a $100 tax credit and the federal government gives you a $100 charitable deduction. Normally this doesn’t make you any richer because you are merely replacing state tax remittance with a scholarship donation, you are basically just directing the state to allocate your taxes to scholarships. I don’t know why the hell a state would want to give up control of how their tax dollars are spent but some states seem to be trying to make some sort of ideological point and frankly most states don’t give a 100% tax credit.
Where it gets hinky is for people on the AMT (and this includes a very large percentage of the donor class) because your ability to deduct state taxes on your federal returns is restricted under the AMT but your ability to take charitable deductions is not. But that’s probably too deep in the weeds for most people to give a shit.
So here’s my problem:
If a state legislature, wants to fund scholarships then why the fuck don’t they just fund scholarships, why bother with the rigmarole of giving out tax credits and let wealthy taxpayers decide how large the program should be?
There are traditional charities that handle that. This is a tax shelter reserved for people earning over 200k. Their donations both reduce their state income tax liablity and they’re also allowed to claim a charitable donation on their Federal taxes. That’s called double dipping.
You say that, but WHY do only people paying the AMT make money by double dipping?
For instance, if I lived in Georgia, I could get 100% of my donation refunded by the state, thereby costing me nothing. And, I could claim the donation as a charitable donation on my Federal taxes, thereby reducing my taxable income. Haven’t I made money? I don’t pay the AMT.
In Georgia the profit potential is available to anyone, really, because it provides a 100% credit (but limits individual contributions to $2,500.00). It’s the states where only a percentage is credited where the AMT thing comes in, because your marginal federal tax rate plus your state credit would have to exceed 100%.
I explain it in my original post but not in much detail.
If you replace a $100 state tax liability with a $100 charitable donation, you are effectively in the same place. You’re still out $100 and you get to deduct that money on your tax return either way… Unless you are subject to the Alternative Minimum Tax (generally applicable to folks making more than 200K). The alternative minimum tax does not allow a deduction for state taxes but DOES allow a deduction for a charitable donation. So if you can convert your state taxes to charitable donations, then you are turning non-deductible state taxes into deductible charitable donations.
There is political value in complicated processes because fewer people understand what’s going on and will complain about them.
Think about if you had to go explain why this is bad to a random person on the street. Do you think that more than 1% of people would even understand what’s going on? Think about just trying to explain the AMT to people…
There’s also political value in not actually making hard decisions, like how much to fund various programs.
A clear budget line item to give $X to scholarships can be easily understood, and easily attacked both by people who think it’s not enough (“Those crooks in Capital City spent $Y (> $X) on [program that all right-thinking people disapprove of], but underfunded scholarships with just $X!”) and those who think it’s too much (“Those crooks in Capital City wasted $X of our tax money on scholarships!”)