Now Private-School Tax Credits Are Racist

Chris Duncombe

The Left continues to racialize everything, absolutely everything. It makes me sick to the stomach to write about race on this blog so often, but the “progressive” assault on a post-racial society in Virginia is an unrelenting, 24/7 activity, and if I don’t call the Left to account, it appears that no one else will.

Chris Duncombe, policy director of the center-left Commonwealth Institute think tank, opines favorably upon a new Internal Revenue Service rule that prevents people from “double dipping” when making charitable donations to scholarships provided by private or religious schools. My concern here is not the merits of the IRS ruling, which may be valid, but the reasons Duncombe expresses for disliking the special tax credit crafted to encourage donations to private-school scholarships:

People claiming these credits are more likely to be white than Black or Latinx, due to Virginia’s long history of racial discrimination and the under-representation of Black and Latinx filers in the state’s highest income brackets.

So… it’s now a bad thing for wealthy white people to make donations to provide scholarships that overwhelmingly benefit poor minorities.

Who are the real racists here? Affluent whites who underwrite scholarships for minorities, or white progressives who oppose policies that provide minority families an alternative to failing public schools?

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20 responses to “Now Private-School Tax Credits Are Racist”

  1. Steve Haner Avatar
    Steve Haner

    The Left hates anything that financially helps schools outside their regulatory control, that helps people trapped in failing public schools to escape. The IRS ruling was not unexpected, has a strong rationale, and I think flows from a provision in the 2018 TCJA, but that sentence you’ve flagged IS telling. The same complaint could be pointed at any tax provision which requires a bit of free cash flow to leverage (other charitable giving, 401K, HSA, Roth IRA, 529 Plan…). You also need to have a large enough tax liability to make such strategies attractive. I’d rather they get a tax break by donating something.

    So to repackage something I said earlier, I don’t see this as white-black but rich-poor, and if the question is do rich people hire lobbyists to write tax laws to benefit rich people, that would be yes. When the Commonwealth Institute is attacking an effective pathway out of poverty, you can know for sure that its first loyalty is to the left-wing establishment, not to improving the lives of Virginia’s poor.

  2. Acbar Avatar

    This post, and your example from the PRC yesterday, really are outrageous examples of finding racism under every stone turned. Here is, to me, an even worse example at the national level, from today’s WaPo business section:
    When it comes to helping the schools, there was a recent blurb up here in NoVa berating certain public school PTAs for raising funds for their schools because that helped only the kids in those schools and because they were preponderantly white kids, such fundraisers were plainly racist. Gaaah!

  3. Dick Hall-Sizemore Avatar
    Dick Hall-Sizemore

    It is unfortunate that Duncombe included that extraneous sentence in his analysis.

    Beyond that, however, I want to question one of the premises underlying the comments on this blog. Jim refers to “policies that provide minority families an alternative to failing public schools.” Steve refers to “help[ing] people trapped in failing public schools to escape” and to ” an effective pathway out of poverty.”

    Like them, proponents of the Education Improvement Scholarship Tax Credit argue that it helps children in poverty-stricken families escape their failing schools and get a good education.

    But do those scholarships, which earn their donors tax credits, really help minority children in poor families? One of the statutory criteria for such scholarships is that the student’s family income cannot exceed 400 percent of the federal poverty guidelines. The poverty level of a family of four is $25,750. Therefore, a student from a family of four with a family income of more than $100,000 could qualify for one of these scholarships. In fact, both children from this family could qualify for a scholarship. If there were more children, the income threshold would be higher. I’m sorry; I don’t think a family with an income in excess of $100,000 is poor.

    So, is there any data on who is getting these scholarships that are subsidized by Virginia’s tax policy? How many of these kids are really from minority families living in poverty? In the Richmond area, how many kids from poor Richmond families, minority or not, get scholarships compared to those from middle class families in Henrico, Hanover, or Chesterfield?

    1. TooManyTaxes Avatar

      Dick -you would be quite offended at Fairfax County. A number of years ago, it was made public that a number of families with incomes of more than $100,000 were living in taxpayer-subsidized housing. Whether they were friends of elected officials was never determined.

  4. Dick Hall-Sizemore Avatar
    Dick Hall-Sizemore

    Another question would concern the size of scholarships available. If the scholarship covers only a portion of the tuition of the private school, it is likely to be of little use to a child from a family in poverty. For example, if the cost of attendance is $5,000 a year, then a scholarship covering half that amount would not help a family making $25,000 a year, because they would not be able to make up the difference, whereas it could be very helpful to a family making $75-80,000 per year.

    The annual report submitted to by the Department of Education on the scholarships granted by foundations qualifying under the provisions of this program shows that many foundations make hundreds of scholarship grants. One made over a 1,000. These numbers lead me to suspect that the scholarships were small and would not have benefited kids from in poverty.

    1. Fair question. I, too, would like to know who is getting the scholarships and how big the scholarships are. That data would be very pertinent to this debate.

  5. Acbar Avatar

    My experience in NoVa is that such scholarships DO help a large number of minority kids in the District who want to escape their neighborhood public school and attend a private school — and indeed, that the clamor for such a safety valve was part of what led to the explosive growth of charter schools in the City. Some of them may have come from relatively well-off minority families but that does not mean the cost of educating multiple kids in private secondary schools followed by college is trivial even for well-off families. Undoubtedly some of the support for those subsidies came from non-minority parents but that does not mean they should not have been made available.

    Such things as tax credits and tuition grants cannot be given solely to racial minorities. Just because Virginia does not have such a high percentage of minority students as the District, is that a reason NOT to offer tax credits for the purpose of private education? It seems to me, either public policy is behind secondary school choice, including some or all of the cost to those who choose to obtain it privately, or it isn’t. After all, the kid who doesn’t go to the public school isn’t costing the State to educate him even though all local citizens are paying to make that choice available to him — why not give a portion of that back to his parents, or their benefactors, as a tax credit.

    1. Dick Hall-Sizemore Avatar
      Dick Hall-Sizemore

      Using this logic, my daughter, who is homeschooling her three children, should get some sort of tax credit.

      Also, is the income criteria in the District as high as that in Virginia?

      1. Acbar Avatar

        Yes; and, don’t know. DC school vouchers are available subject to an income cap that varies according to the number of people in the household but I don’t think the cap even for a big household reaches as high as $100K. As for people like your daughter, from an economic policy point of view why not pay parents the amount it would have cost the State to educate their kid by right in the public school, if they enroll the kid elsewhere (including home-schooling)? Kind of reminds me of the Dem’s public/private option versus public single-payer debate over how to expand health care coverage to make it universal. But of course when it comes to secondary school aid, the non-economic factors — the political objections, the religious school objections, the union objections — usually determine the outcome.

  6. wonderbread Avatar

    I can’t speak to the breadth of the program, but from what little I’ve seen, Yes, they really do help minority children in poor families. One school we’re familiar with, The Anna Julia Cooper Episcopal School in the East End, has brilliantly used these tax credits to build a school that well serves the students of their community, providing an alternative to MLK. The fundraising for the scholarship allows for all the students, who have strict income and geography limits and are 99% black, to receive a high quality classical education for free. They’ve additionally partnered with some of the local private high schools to get their highest performing kids full scholarships to schools they’d never otherwise be able to imagine attending.

    You could make an argument that a voucher system would be more effective still, but this program does a world of good.

    1. Dick Hall-Sizemore Avatar
      Dick Hall-Sizemore

      That is welcome news.

  7. Acbar Avatar

    You know, I’m surprised no one has mentioned that since the particular Virginia subsidy program here offers tax credits, it necessarily offers nothing to those who pay no taxes — which is a more regressive outcome than merely having a high ceiling for eligibility, and tends to support the argument that this program was never intended to help low income applicants. As SH says above, this tax credit is more about rich vs poor than about minorities.

  8. Steve Haner Avatar
    Steve Haner

    Acbar, that had slipped my memory but yes, and I think even more important the tax credit may be transferable. No question this is a way to strengthen private schools, no question 4 x the federal poverty level is at best lower middle class in many parts of VA, no question the tax benefits are for the high end, and the whole program can be dissected and debated and tightened. But it is not racism in any form and many private school managers and parents are very glad to find ways to diversify those schools. Preventing that is part of the motivation of the opponents.

  9. LarrytheG Avatar

    The logic behind all charitable tax credits is that they go to help any organization that helps people in general without regard to race, color, etc…

    tax credits for scholarships are problematical in that they can be used to help people who are not poor and not minorities which sorta violates the concept of “charitable”.

    Put another way – what if someone wanted to send their kid to a private school but wanted to take a charitable deduction for the tution?

    I don’t have a problem at all with charitable deductions that go to help truly disadvantaged kids – no matter how it is configured but I do have problems with using tax credits to help pay for private schools for folks who are not disadvantaged.

  10. cjduncombe Avatar

    Hello Jim, This is Chris from the above post. Two points 1) I don’t think taxpayers should pad the earnings of wealthy donors that have found a quirk in the tax system that lets them profit off alleged charity. People are free to donate to schools of their choice, but taxpayers shouldn’t underwrite the costs to the extent that rich people are making money off of it. When we talk about closing unfair tax loopholes, this is exhibit A. 2) It’s important that we look at the impacts of all public policies by race to see who is affected by them. That’s not calling a policy racist. That’s making sure extremely harmful policies aren’t enacted without understanding how different communities will be impacted. If you have data showing Black and Latinx children are more likely to benefit from these donations, that would be a good counterpoint to share. Feel free to reach out to us directly if you have any questions about our research or analysis.

    1. Hi, Chris, thanks for joining the conversation.

      I concede your first point about closing tax loopholes. It is absurd to make tax breaks so generous that a donor can actually come out ahead by making a contribution. Insofar as that actually occurs, the give-aways need to end.

      Regarding your second point, I don’t have authoritative data on who benefits from the Virginia tax credits. Anecdotally, I can tell you of at least two private schools in inner-city Richmond — Wonderbread refers above to one of them, the Anna Julia Cooper school — that rely heavily upon scholarships made possible by the tax credits.

    2. TooManyTaxes Avatar

      Who funds your organization?

      An argument can be made that taxpayers are subsidizing your organization, which I presume is tax-exempt but trying to influence public policy. Ordinary people or businesses cannot operate on a tax-free basis while trying to influence public policy. In fact, federal and state lobbying expenses are not tax deductible.

  11. Steve Haner Avatar
    Steve Haner

    I’ll make a point for Chris that the non-profit deductions providing some of the support for Commonwealth Institute are different than the tax credits in discussion here. A tax credit is a far more valuable consideration, especially if it can be sold. But you do have a point, TMT, in that all around the political spectrum people are engaging in activities of dubious “charity” when real charities have no shortage of need. The Congress should shut it all down and limit the tax-free status to truly charitable activities.

    1. Acbar Avatar

      “Truly charitable” — yes — ah, but defined how? Enforceable how?

  12. TooManyTaxes Avatar

    I have no problem with an all-volunteer organization being tax exempt and advocating for their cause or interests. But if the organization pays any money for employees or contractors and also advocate for their cause or interest either directly or indirectly, they should lose tax exempt status. It would clean up a lot of Washington and Richmond.

    I still want to know who is funding the Commonwealth Institute.

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