Carrie Lukas

Help a Student, Get a Tax Break

Posted on December 08, 2003 | Type: Op-Ed | Author: Carrie Lukas
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In 1998, few Americans had ever watched "reality" television. Even fewer had heard of Britney Spears. Yet today, they are embedded in the fabric of our popular culture. Likewise, few Arizonans knew theirs was the first state in the country to allow tax credits for donations to fund private school scholarships. Six years later, for over 50,000 Arizona taxpayers, the scholarship tax credit program is as much a holiday tradition as trips to the shopping mall.

For those not in the know, Arizona's landmark scholarship tax credit program allows individual taxpayers to take a dollar-for-dollar income tax credit for donations up to $500 to non-profit charities that fund tuition scholarships. Joint-filing married couples can take a tax credit worth up to $625.

Since the program's inception, taxpayers have donated $84 million to help send students to schools of their choice. In 2002 alone, 50,000 Arizonans donated more than $26 million to fund scholarships for 19,000 students.

To put those figures in perspective: Arizona has just over two million taxpayers, which means that about one in 40 took advantage of the opportunity to contribute in 2002. Yet even this impressive participation rate understates the level of commitment to the program. Since roughly half of Arizona's taxpayers have a total tax liability of less than $500, they are unable to make full use of the credit. When you consider just the Arizona taxpayers who can claim the full contribution, one out of 20 took advantage of the opportunity to donate.

The participation of taxpayers is but one measure of Arizona's commitment to this initiative. Arizonans have also created 47 charitable organizations to collect and distribute scholarship donations. A few are large organizations, like the Arizona School Choice Trust, which distributed nearly $1 million this year to more than 550 needy children. Several other large student tuition organizations are organized by religious affiliation. Together, the top six organizations--each of which collected more than $1 million in 2002--account for nearly three-quarters of the money collected.

Other Arizonans have created smaller organizations to meet more specific needs. The Engelhardt/Pappas Foundation--named in part for the late Florence Englehardt, a professor of social work at ASU--has grown from helping four students in 1999 to 32 in 2003. Executive Director Karen Vargas explains that her organization evaluates applicants on the basis of financial need as well as through interviews that identify intellectually engaged children.

For example, the foundation gave scholarships to two young girls with near-perfect GPAs, whose parents support them on less than $22,000 per year. Another recipient is a sophomore boy whose parents have both spent time in prison. He just earned a 3.9 GPA during his first quarter in private school and now he has hope for a better future. "If we hadn't been there," says Ms. Vargas, "I don't know what would have happened."

Giving students a choice means giving them a chance. And that is the reason behind the scholarship tax credit. Yet there are additional benefits, such as reducing the burden on public schools. Without the credit, between 2,000 and 4,000 of the 19,000 scholarship recipients would likely enter Arizona's public school system. Arizona spends about $4,800 per student in its public schools, so those scholarship students represent savings of between $11 and $19 million, offsetting much of cost of the tax credit to the state.

In the past year alone, and despite an economic downturn, participation in the program grew by six percent. As more taxpayers contribute, it is likely that even more students currently struggling in public schools will use scholarships to transfer to less-expensive private schools, making the program even more cost-efficient.

Making a contribution to Arizona's tuition tax credit program is now as much a part of the season as hanging white lights on cacti--and it's a lot less painful. For those who haven't donated before, this year is a great time to start. If you have donated previously, tell a friend, since there are an estimated 6,000 deserving children on scholarship waiting lists.

No matter what, if you are living in Arizona, your life is being touched by this program. Like the holiday music, it is just part of the culture.

--The writer director of policy for the Independent Women's Forum in Washington, D.C., and author of a new Goldwater Institute report, The Arizona Scholarship Tax Credit: Providing Choice for Arizona Taxpayers and Students.

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