Stephanie Saul wrote a stinging critique of scholarship tax credit (STC) programs in the New York Times:
The scholarship programs represent the expansion of a mission that began more than 10 years ago, when the school choice movement ran into headwinds over the use of vouchers. Vouchers, which directly use public money to finance private school educations, were unpopular among many voters and legislators, and several state courts had found them unconstitutional.
Proponents decided to reposition themselves, and in 1997, Arizona’s Legislature adopted the first tax-credit scholarship program.
For school choice advocates, the genius of the program was that the money would never go into public accounts, making it less susceptible to court challenges. Representative Trent Franks, an Arizona Republican and former state lawmaker, is credited with the idea of routing the donations through nonprofit organizations. “The teachers’ union called it fiendishly clever,” Mr. Franks said during a recent interview.
“The difficulty of getting at this thing from a constitutional point of view is that there are private dollars coming from a private individual and going to a private foundation. It drives the N.E.A. completely off the wall because they can’t say this is government funding,” Mr. Franks said, referring to the National Education Association.
If any money kept or donated due to a reduction in taxes is rendered “public money”, then every church and non-profit organization is partially funded with “public money” because of the tax deduction for charitable donations. This proposition would clearly violate the First Amendment’s Establishment Clause, which forbids the public financing of churches. Indeed, since the government has the power to raise tax rates as high as it pleases, ultimately all money is “public money”. Understanding the absurd implications of Saul’s position, the courts have wisely rejected it.
NR’s Robert VerBruggen, however, has also been critical of STC programs, which he sees as a departure from an honest democratic process:
Let’s be absolutely clear about what happens when someone makes a “donation” under a tax-credit regime: If the donation amount is $1,000, the donor knocks $1,000 off his tax bill. This isn’t a deduction; he doesn’t merely pay taxes on $1,000 less of his income. This isn’t a partial credit; his taxes are reduced by the full $1,000. This is a dollar-for-dollar reimbursement by the government. There is absolutely no difference between this situation, and a situation in which the government simply gives $1,000 to fund vouchers directly. Either way, the government has lost $1,000 in tax revenue to a voucher program (with all the good and bad that entails), the voucher program has received $1,000 in funding, and the individual has not foregone a single dollar.
There is more to Robert’s argument, which I found convincing.