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Myth: Educational choice programs that offer scholarship tax credits are funded with public dollars

There are numerous myths concerning educational choice programs. But in order for parents and students to make well-informed education decisions, these myths must be debunked. Below is a third myth and reality on how education choice works taken from a report by the Institute for Justice. (You can read about other myths I have written about here and here.)

Myth: Educational choice programs that offer tax credits to those donating to private charities that award student scholarships are funded with public dollars.

Reality: Every court in the nation to consider this question, including the U.S. Supreme Court, has concluded that funds donated to private charities are private funds, regardless of whether the donation makes the taxpayer eligible for a tax deduction or a tax credit.

Tax-credit scholarship legislation that has been proposed at the Capitol would provide alternative education options for low-income Minnesota families. As the state continues to struggle with stubborn education shortcomings, these scholarships would help better serve students most in need of new opportunities.

The tax-credit scholarships would be funded through private contributions made to non-profit scholarship granting organizations with 501(c)(3) status that have been approved by the Minnesota Department of Revenue. As the bill’s author Senator Roger Chamberlain stated, the money “never gets to the state treasury. It’s just a reduction in the revenues collected.”

Courts across the country, including the U.S. Supreme Court, have concluded that tax credits are merely a reduction of tax liability and allow taxpayers to keep more of their own money. Because the money is a donation, the state does not own or even ever physically possess it. So, why don’t opponents of tax-credit scholarships take issue with other donations that involve tax credits and tax deductions? What about donations made to a taxpayer’s favorite charity? Or a church or other religious organization? Does the state have claim to that taxpayer money?

Tax-credit scholarships are funded by private individuals giving their private funds to private organizations to help families in need send their children to the learning environment that works best for them.

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