March 2, 2016. The education tax credit proposals currently being discussed have significant drawbacks as outlined in FPI’s new brief.
Both the governor’s proposal and the senate’s represent misguided tax policy for a number of reasons:
- The PCEA represents a radical and unwise departure from existing state tax policy because it provides an unprecedented proportion (75 or 90 percent) of tax reduction relative to a contribution. It has the potential to lessen charitable contributions for a wide range of worthy causes.
- Because of how the allocation of credits is administered and the fact that the education tax credit skirts limits on charitable contributions for high-income taxpayers, there is nothing to prevent a situation where all or the lion’s share of credits go to a relative handful of wealthy donors, corporations, or financial partnerships.
- The state is essentially delegating its spending authority to private individuals, departing from the well-established and constitutionally sound basis for allocating state education aid and potentially in violation of section 7 of Article 7 of the state constitution that requires all appropriations to be “distinctly specified.”