SUPREME COURT OK’s ARIZONA TAX CREDIT FOR RELIGIOUS SCHOOLS

National Public Radio | Heard on All Things Considered | http://n.pr/ghCJa3

April 4, 2011 - MICHELE NORRIS, host:

A deeply divided Supreme Court today ruled that taxpayers have no legal right to challenge a tax break that channels millions of dollars to private religious schools. The 5-to-4 decision left intact an Arizona law - an Arizona tax subsidy that was enacted because the state Constitution forbids direct aid to religious schools.

NPR's legal affairs correspondent Nina Totenberg reports.

NINA TOTENBERG: Arizona is one of many states that has a state Constitution barring direct aid, including vouchers, to religious schools. These provisions date back more than a century.

To get around this, state legislators enacted a law that allows residents to take a tax credit for money given to private school scholarship funds known as school tuition organizations.

Now, remember, a tax credit is different from a tax deduction. The credit comes right off the tax bill on a dollar-for-dollar basis. So if you donate $500 to a school tuition organization, you get $500 off your taxes.

In contrast, if you gave a charitable donation to a school, you get no more than one-third of that as a tax deduction.

smf/4LAKids: emphasis added!

Under the Arizona law, more than $50 million was donated of to these school tuition organizations, which in turn directed the money to private schools, at least; at least two-thirds of them religious schools.

A group of taxpayers challenged the tax credit in court, contending that it amounted to an unconstitutional state subsidy for religious schools. But today, the U.S. Supreme Court ruled that the taxpayers have no legal standing to bring such a challenge, that in effect, they cannot get in the courthouse door.

Justice Anthony Kennedy, writing for the five-justice majority, said the taxpayers may challenge a direct legislative appropriation for religious schools, but he said a tax credit is different because any injury to the disagreeing taxpayer is speculative, and the money is directed by private individuals, not the state.

Arizona State University law professor Paul Bender(ph), who represented the Arizona taxpayers, says the court's opinion defies reality.

Mr. PAUL BENDER (Law, Arizona State University): The state has a budget deficit of a billion dollars. So when $100 million doesn't come into the treasury, the rest of the state's taxpayers have to make up for that $100 million. The idea that that doesn't affect the rest of the state's taxpayers is just fantasy.

TOTENBERG: Not so says school choice advocate Tim Keller of the Institute for Justice.

Mr. TIM KELLER (Attorney, Institute for Justice): That only looks at one side of the ledger. It is much more cost-effective to educate children in private schools.

TOTENBERG: Justice Elena Kagan, in a blistering dissent and her first since joining the court, said the court's opinion devastates the ability of taxpayers to challenge government actions that favor religion.

In reality, she said, there's no difference between a tax credit and a direct appropriation. What is a cash grant today can be a tax break tomorrow.

The court's decision, she charged, offers a roadmap, more truly a one-step instruction, to any government that wishes to insulate its financing of religious activity from legal challenge.

Today's ruling follows a 2007 decision that barred challenges to President Bush's faith-based initiative because it used discretionary funds in the executive branch. But Stanford law professor Michael McConnell(ph) says these decisions change little.

Mr. MICHAEL McCONNELL (Constitutional Law, Stanford University): I think this probably does not change the ultimate outcome of any cases. It just means that they're going to be resolved at a slightly earlier stage in the litigation.

TOTENBERG: University of Michigan law professor Douglas Laycock isn't so sure. He notes that although the Supreme Court upheld school voucher programs nearly a decade ago, most states have not adopted voucher programs because they cost the state money.

Mr. DOUGLAS LAYCOCK (Law, University of Michigan): Doing it through tax credits might be more politically attractive than doing it through vouchers because it's mostly Republicans who support these aid to religion programs. And Republicans don't want to raise taxes to pay for vouchers. But if they can do it through a tax credit, they can support religious schools and claim as a tax cut all at the same time.

TOTENBERG: School choice advocate Keller may not agree with that characterization, but he does say that today's ruling will spur similar action in other states.

Mr. KELLER: This decision will certainly embolden those state legislatures to move ahead with those proposals.

TOTENBERG: He says eight states are actively considering similar laws, and six, in addition to Arizona, have already adopted them. Nina Totenberg, NPR News, Washington.