Incentives Watch: No Summer Break for the Scholarship Tax Credit Debate


During the summer months, it is safe to assume that school is the last thing on the minds of most students. However, while the students enjoy their summer break the debate about scholarship tax credits remains ongoing.

Scholarship tax credits have a habit of staying in the public eye for several reasons. This ongoing debate is fueled by a number of factors, most notably politics. Support for these credits seems to fall squarely along party lines, with Democrats opposing them and Republicans favoring them. This is a division that was evident during this past legislative season

However, it isn’t just the politics that adds fuel to this fire. Feeding one side of the debate are question regarding the constitutionality of the programs. Mainly, opponents believe these are public funds being used to subsidize religious schools. Supporters of the credit counter that they believe these credits provide educational freedom for low- to moderate-income families. With such strong positions, it is easy to see why neither corner is willing to throw in the towel anytime soon.

A July 28 article in The Arizona Republic best illustrates the underlying argument in support of the credits. This article focuses on an expensive Catholic school in Arizona, and highlights how the use of tax credit funded scholarships has allowed the school to be affordable for many students who would otherwise not have had the means to attend.

However, not everyone agrees that this is a good thing. Religious schools account for roughly 70 to 80 percent of the private schools nationwide, according to a July 30 Tucson Weekly article. For those who believe that these programs use public funds to subsidize religious institutions, the numbers are clear as can be, it is almost a certainty that the money is going to go to a religious school. 

The stakes of this debate remain high for both credit supporters and credit opponents. Florida, a state where the debate is currently playing out inside a courtroom, is a perfect example of the impact that these credits, or their repeal, may have. Should the credit’s opponents succeed in their challenge, and the credit is ruled unconstitutional, there will be an influx of nearly 70,000 students into the public school system, according to a June 13 Orlando Sentinel article.

As the school year quickly approaches, the tax credit debate will stay in the forefront of education. Whether it is playing out in a state’s legislature, courts or openly in the media, scholarship tax credits aren’t going anywhere, even if school’s out for summer.   

*Continue the discussion on Bloomberg BNA's State Tax Group on LinkedIn: Are scholarship tax credits an appropriate way to provide low- to moderate-income families educational options?  

For more information about scholarship tax credits, check out Bloomberg BNA’s Credits and Incentives Portfolios by signing up for a free trial of the Bloomberg BNA Premier State Tax Library today.