Policy Documents

Supreme Court Upholds Arizona Tax Scholarship Program

Ben Boychuk –
April 4, 2011

The United States Supreme Court on Monday sidestepped the direct question of whether Arizona’s 14-year-old tax credit scholarship program violates the Establishment Clause of the First Amendment, ruling instead that opponents had no standing to challenge the program.

Justices voted 5-4 in Garriott vs. Winn and Arizona Christian School Tuition Organization vs. Winn against lawsuit by the Arizona chapter of the American Civil Liberties Union, which challenged a tax credit program giving Arizona parents choices other than their neighborhood public schools.

Arizona’s scholarship program offers individuals a 100 percent tax credit up to $500 (or $1,000 for couples filing jointly) for donations to state-authorized school tuition organizations. Those charitable groups then award scholarships for students to attend a private school of their parents’ choice.

More than 27,000 students used scholarships averaging $1,889 in Arizona in 2009 under the program.

Tax Argument Rebuffed
The court soundly rejected the ACLU argument that tax credits constitute state funds, in effect claiming that all money is state money except that which the state declines to collect.

“Awarding some citizens a tax credit allows other citizens to retain control over their own funds in accordance with their own consciences,” Justice Anthony Kennedy wrote for the five-justice majority, which included Chief Justice John Roberts, and Justices Antonin Scalia, Clarence Thomas and Samuel Alito.

The ACLU position, Justice Kennedy wrote, “assumes that income should be treated as if it were government property even if it has not come into the tax collector’s hands.” But, he added, “private bank accounts cannot be equated with the Arizona State Treasury.”

The Ninth U.S. Circuit Court of Appeals in 2009 ruled Arizona’s scholarship program unconstitutionally advances religion because most taxpayers donate scholarship funds to organizations supporting religious schools. The effort to review the Ninth Circuit’s decision was led by the Institute for Justice and the Alliance Defense Fund.

“The court in its decision made it very clear this is not state action," said Tim Keller, director of the Institute for Justice’s Arizona chapter who argued the case before the court last fall. “These are private dollars going to private organizations.”

Kagan Dissents
Justice Elena Kagan wrote the dissent, which was joined by Justices Sonia Sotomayor, Stephen Breyer and Ruth Bader Ginsberg.

“Cash grants and targeted tax breaks are means of accomplishing the same government objective—to provide financial support to select individuals or organizations,” Kagan wrote.

“Taxpayers who oppose state aid of religion have equal reason to protest whether that aid flows from one form of subsidy or the other,” Kagan wrote. “Either way, the government has financed the religious activity.”

Reformers Praise Ruling
School reform groups and constitutional scholars quickly weighed in on the court’s decision. Robert Enlow, president and CEO of the Indianapolis-based Foundation for Educational Choice, lauded the court’s ruling.

“The Arizona Tax Credit Program—like tax credit programs in many states—gives individuals the right to contribute their own money to scholarship organizations that offer kids school choice,” Enlow said in a statement. “The Supreme Court today clearly said that individuals should have the right to contribute to any tax-free scholarship program just as they would contribute to the Red Cross, a homeless shelter or any other charity.”

Enlow said the court’s decision should pave the way for similar tax credit programs across the United States.

“And this has been a year for school choice,” he added. “Legislatures are embracing tax credit programs and vouchers, and this ruling should encourage even more of this educational choice.”

‘Super-Zelman’
Adam Schaeffer, a policy analyst with the Cato Institute’s Center for Educational Freedom, called the court’s decision, “Super-Zelman,” referring to the Supreme Court’s landmark 2002 ruling in Zelman vs. Simmons-Harris, which upheld the constitutionality of school voucher programs.

“The findings in Zelman apply just as well to education tax credit programs, but only credit programs allow taxpayers to spend their own money on education,” Schaeffer explained.

“The Court ruled that education tax credits are not government funds, and the plaintiffs therefore have no standing to bring suit in the first place. They were not harmed because none of their money was collected and then disburse by the state,” he continued.

“Education tax credit programs can expand educational choice and freedom while respecting the preferences and values of the individual taxpayers who earned that money in the first place,” Schaeffer wrote.

Legal scholar Ilya Shapiro noted at the Cato-at-Liberty blog that although the court’s decision hinged on the doctrine of standing, it is a major victory for school choice and state flexibility.

“It makes clear that there is a difference between tax credits and government spending; to find that tax money was used for unconstitutional ends here would have assumed that all income is government property until the state allows taxpayers to keep a portion of it,” Shapiro wrote. “That is not, to put it mildly, how we think of private property.”

“Far from being an impediment to parental control over their children’s education or an endorsement of religious schooling, the autonomy Arizona grants taxpayers and [tuition tax credit organizations] ultimately expands freedom for all concerned,” Shapiro added.

Ben Boychuk (bboychuk@heartland.org) is managing editor of
School Reform News.