Home > Uncategorized > Billionaires Lower Their Taxes Through Donations to Foundations that Underwrite Charters, Private Schools

Billionaires Lower Their Taxes Through Donations to Foundations that Underwrite Charters, Private Schools

May 17, 2017

In several previous posts I’ve made reference to the mechanism that enables billionaires to lower their tax payments by making donations to “Scholarship Foundations” that are created by legislators to purportedly provide children raised in poverty with an opportunity to attend a private or charter school instead of the “failing public school” where they reside. Erica Green’s article in today’s NYTimes provides a detailed description of how some states have passed legislation that makes it possible for donors to some private schools to actually make a profit thought their “generosity”. As Ms. Green reports:

AASA and the liberal-leaning Institute on Taxation and Economic Policy examined programs in 17 states that send more than $1 billion a year to private schools via tuition tax credits, and concluded that private schools were benefiting from a “federally sanctioned voucher tax shelter” for wealthy taxpayers.

The study called it a “get-rich scheme for shrewd taxpayers.

The report focuses on tuition tax credit programs used by some states to help low-income students afford private schools. In these states, individuals and corporations donate to nonprofit “scholarship-granting organizations,” which then distribute the funds to parents. The amount of the contribution can be subtracted dollar-for-dollar from the donor’s state tax bill….

Donors in some states, such as Georgia, Arizona and Florida, have recouped their entire donation in tax cuts, meaning taxpayers can make a contribution to private schools at no cost.

Nine states that allow both a federal tax deduction and a state dollar-for-dollar credit are Alabama, Arizona, Georgia, Montana, Oklahoma, Pennsylvania, Rhode Island, South Carolina and Virginia, the report said. In these states, the report found, donors can even make a profit.

In South Carolina, if taxpayers make a $20,000 donation to a scholarship organization, they not only get a $20,000 state tax credit, but a federal tax deduction valued up to $7,000. The donor could pay $27,000 less in taxes based on a $20,000 donation.

The Times article didn’t drill down into all the varied flaws in the state laws under consideration, nor did it note the fact that some large donors to these “scholarship” funds might also be financially rewarded because they are shareholders in the for profit charter schools that ultimately benefits from the “donations”. The AASA is right to push back against these “…get-rich schemes for shrewd taxpayers” and to call them what they are. Here’s hoping that more taxpayers will see through these ruses.


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