Get this: There’s a state program that is so successful, lawmakers are thinking about making it worse.
The program is the tuition tax-credit scholarship. Companies and individuals can lower their state income taxes by donating to student scholarship organizations (SSOs), which help families pay for private-school tuition.
These tax credits are capped at $58 million statewide each year. And each year, taxpayers hit this cap earlier and earlier: in 2014, by mid-January. The allotment for 2015 may be gone by the time you read this.
Given the program’s popularity, and the fact the average scholarship award is far less than the cost of educating a child in a public school, you might think legislators would simply raise the cap, as they’ve done before.
Instead, there's an argument over how to expand the program. And however unintentionally, one leading proposal would introduce needless complexity — and politics.
First, here’s some necessary background. In 2014, the credits were claimed so quickly that some previous donors weren’t able to give again. Many of these donors were companies that couldn’t estimate their tax liability so early in the year.
While tax-credit scholarships legally can go to any student regardless of his family’s income, data compiled by the state Revenue Department indicate the lion’s share of the money goes to kids from lower- and middle-income families. The vast majority of corporate donations, however, are made to SSOs that focus only on low-income kids. When those companies weren’t able to give, those kids lost out.
So one proposal is to create a second, similar state program limited to low-income kids. But introducing an income requirement is a bad idea.
That’s not because giving scholarships to poor kids is a bad thing. On the contrary, poor kids need school choice most of all, because they tend to be assigned to our worst public schools. But there is no indication poor kids weren’t getting these scholarships in the past; the problem arose only when the cap was hit so quickly. Raise the cap, solve that problem.
An income test would instead create new problems. It would mean government was favoring one SSO model over others, in a marketplace that’s competitive enough for donors to make those decisions.
An income test also means picking a number, and what qualifies as “poor” or “rich” is highly subjective. Say the threshold was $50,000: Is a family with three kids and annual income of $51,000 really more capable of paying private tuition than a family with two kids and income of $42,000?
Worse, folks who don’t think we ought to have tax-credit scholarships in the first place — including many Democrats — would be all too happy to bid the threshold ever downward.
If simply raising the cap substantially won’t work, a sensible compromise would be to spread out the credits throughout the year, maybe semiannually or even quarterly. That would give potential donors more time to determine their tax liability. To the extent that increased corporate donations, it could increase funds for low-income families without moving Georgia away from choice for all.
