Tax Credits Succeed in Arizona

Published December 1, 2000

Thirty-four private tuition charities, supported by more than 30,000 people, donated $13.2 million to provide scholarships to nearly 7,000 Arizona students during the 1999-2000 school year.

There were just two such charities in 1996, reports Heritage Foundation education analyst Nina Shokraii Rees.

Most of Arizona’s tuition programs, according to Rees, offer parents only a partial scholarship towards the cost of private school tuition. Most of the scholarship recipients are from low- to moderate-income families.

The dramatic growth in the number of private scholarship organizations in Arizona is a direct consequence of pathbreaking legislation approved in 1997. The law provides a $500 state income tax credit for contributions to any private charity that uses the money to pay private school tuition for eligible students. Those charities must spend at least 90 percent of the contributions the receive on tuition assistance. The law also provided a $200 tax credit for donations made directly to public schools.

“The growing demand for private education in Arizona has led to a school boom,” notes Rees, pointing to a new Catholic school being built in Mesa and several other schools whose doors have been kept open by the tax credit.

Concern remains over whether a state tax credit can ultimately raise enough scholarship money to provide a real competitive alternative to the public schools. According to Mary Gifford of the Goldwater Institute’s Center for Market-Based Education, less than 15 percent of Arizona’s taxpayers have a tax liability greater than $750, which is just $50 more than the maximum tax credit a person would claim to take advantage of both the public ($200) and private ($500) school tax credits.