Georgia Tax Credit Scholarship Program Limit Reached on First Day

Published February 20, 2015

Tax credits for Georgia’s scholarship program reached their $58 million limit on Jan. 1 for 2015, nearly three weeks earlier than last year. The popular program gives dollar-for-dollar tax credits to individuals who donate to the scholarship fund, up to $1,000 for singles and $2,500 for married couples who file taxes jointly. Businesses can also donate and receive credits of up to 75 percent of their state income tax liability.

In 2008, Georgia’s General Assembly passed the Qualified Education Expense (QEE) Tax Credit Bill, and Gov. Sonny Perdue signed it. The law provides alternatives to the traditional public school system, fraught with some of the lowest high-school graduation rates in the country (ranking 48 among the 50 states).

‘Thoroughly Vetted’

Shannon Goessling, executive director and chief legal counsel of Southeastern Legal Foundation, says the program is constitutional, contrary to opponents’ claims.

“From a legal and state constitutional standpoint, the program has been thoroughly vetted by top legal analysts and scholars and is very likely to survive the current legal challenge against its validity,” she said. “A 2011 U.S. Supreme Court decision upheld a similar program in Arizona, so there is good case precedent.”

Goessling further notes the need-based program allows Georgians to “direct a limited portion of their state income tax to one of several nonprofits and designated for general scholarship funds for private K-12 schools in the state.” The program does not allow scholarship organizations to favor individual students Goessling points out.

“A family could not direct its tax credit to benefit a specific child,” she explained. “It’s innovative, to be sure, and its success has demonstrated that there is a broad public appetite for this type of scholarship funding for private schools.”

Substantial Public Support

Public support for the program is high. The Georgia Public Policy Foundation, an independent think tank that proposes practical, market-oriented approaches to public policy, released a poll last spring showing more than 70 percent of Georgia residents support the program and 61.8 percent agreed the statewide yearly allowance should be increased to $100 million.

Another poll, released by McLaughlin and Associates for the American Federation for Children, a pro-charter school group, showed similar results: 65 percent in favor of the program, and 64 percent in favor of raising the yearly allowance above 2015’s cap of $58 million.

Saves Taxpayers’ Money

A comparable program in Arizona shows the state ends up saving millions of dollars per year. “The average scholarship is just a fraction of the amount the state spends to educate each child,” Goessling said. “Dr. Charles North of Baylor University found that the state saves anywhere between $44 million and $186 million. So it’s clearly not a dollar-for-dollar, either-or proposition, as anti-school choice advocates have argued for decades.”

Opponents challenged Arizona’s program, similar to Georgia’s, and the case went all the way to the U.S. Supreme Court. In 2011, the Court issued its decision on the case, Arizona Christian School Tuition Organization v. Winn, ruling in favor of school choice.

In the majority opinion, Justice Anthony Kennedy declared, “Like contributions that lead to charitable tax deductions, contributions yielding STO tax credits are not owed to the State and, in fact, pass directly from taxpayers to private organizations. Respondents’ contrary position assumes that income should be treated as if it were government property even if it has not come into the tax collector’s hands. That premise finds no basis in standing jurisprudence. Private bank accounts cannot be equated with the Arizona State Treasury.” Thus, the Court ruled a tax credit is not government property, but property of the taxpayer.

Georgia’s homeschooling community also supports the tax credit program. Mary Jo Patterson, a member of the Georgia Home Education Association (GHEA) board, said, “School choice is one way to break the monopoly that the government school system has over education and will, in my opinion, improve education.”

A bill introduced in the current legislative session, HB 35, would raise the program limit from $58 million to $250 million—a more than fourfold increase. Patterson agrees with this policy proposal, noting “the old amount was immediately grabbed up.”

Alexander Anton ([email protected] writes from Palatine, Illinois. 

image by Brad Flickinger.