updated: 2/10/2009 12:08:18 PM

Friedman Foundation Calls for Tax Credits to Benefit K-12 Education

Inside INdiana Business.com Report

A proposal to provide tax credits for donations to scholarship granting organizations being discussed at the Statehouse is supported by the Indiana-based Friedman Foundation for Educational Choice. President and Chief Executive Officer Robert Enlow says such a move would allow K-12 education to benefit directly from tax credits. A study from the foundation and the Institute for Justice in Washington, D.C. suggests none of the current tax credits in Indiana accomplish that goal.


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Source: Inside INdiana Business

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Press Release

INDIANAPOLIS – (February 10, 2009) -- Indiana has a long history of embracing tax credits to achieve desirable public policy goals, according to a report released today by Indiana’s Friedman Foundation for Educational Choice and the DC-based Institute for Justice. The report also finds that Indiana’s system of tax credits, which allow religious institutions to benefit and which encourage extensive private investment in numerous social needs, has little fiscal impact on the state budget.

“Tax credits are a common policy-making tool that legislators have employed time and time again in Indiana,” said Robert Enlow, President and CEO of the Friedman Foundation for Educational Choice.

The report analyzed data between 1998 and 2005 (the last year data were available) and found that the total credits awarded totaled more than $1.57 billion during the eight years, which accounted for only 4.03 percent of the total taxes due in the state.

However, of all the credits available in Indiana, only three benefit higher education. None directly benefits K-12 education. “Individuals can claim a 50 percent state tax credit for donating to Marian College or St. Mary of the Woods College, which is a good thing, but no credit at all for donating to Holy Angels school or the Fort Wayne Lutheran schools,” noted Enlow.

The report also noted that Indiana’s tax code includes more than 40 tax credits that promote everything from social welfare programs to Brownfield redevelopment to economic investment to resource conservation and historic rehabilitation. But less than 10% of the credits available are set aside for education.

“The state’s current system of tax credits is skewed,” noted Enlow. “The state should re-align its tax credit priorities to fit more with one of the state’s most pressing needs, K-12 education. We know something is wrong when a company can claim a tax credit for refurbishing a riverboat, but not get a dime for helping our state’s private and public schools,” added Enlow.

This wide ranging report on the breadth and history of tax credits in Indiana comes as education tax credit legislation makes its way through the 2009 session of the Indiana General Assembly. The proposed tax credit legislation would provide tax credits for donations to scholarship granting organizations, who would offer scholarships to students to attend the school of their choice. Similar legislation passed the State Senate in 2008.

“A scholarship tax credit plan for K-12 education would realign Indiana’s priorities and encourage new investment in and philanthropy support for all of our schools,” concluded Enlow. “Tax credits that provide a broader array of educational options for families are commonplace around the country, including Arizona, Florida, Georgia, Iowa, Pennsylvania, and Rhode Island.”

“I see no reason why Indiana should not get a win, win, win solution: a win for taxpayers who want efficiency in times of economic turmoil, a win for schools who need support and stimulus to improve and a win for students who should be free to attend the best possible school,” said Jeff Brantley, executive director of School Choice Indiana.

Key Points

- Indiana has a long history of embracing tax credit programs to achieve desirable social policy goals.

-Currently, the state currently has more than 40 tax credit programs on the books. These tax credits incent individual and corporate philanthropists to support worthy social causes.

-Tax credits cover a wide range of subjects but generally fall into four broad categories: education (21st Century Scholars Program), social welfare (Neighborhood Assistance Program), economic investment (Hoosier Business Investment) and resource conservation (Energy Savings Appliances Program).

-Between 1998-2005, individuals have claimed over $1.3 billion in tax credits to support programs that promote societal wellbeing. Corporations have claimed over $250 million in credits.

-Indiana’s tax credit policy should be more in line with the state’s most pressing need, K-12 education.

-While the state’s tax policy encourages numerous desirable public policy goals, such as helping families accumulate savings and encouraging business to relocate their headquarters, there is a need to ensure that these credits are in line with the state’s most pressing needs, particularly that of K-12 education.

-Less than 10% of the tax credits available in Indiana apply to K-12 and post-secondary education, which is more than half of the state’s annual budget.

-A company can currently receive a tax credit for refurbishing a riverboat but nothing for a donation to our state’s urban K-12 schools.

-A company can get a tax credit of up to $100,000 for hiring an adult offender, yet can’t claim a single dime for a donation to help a student attend a charter or private school.

- Indiana’s tax credit policy recognizes the need for higher education, but does not extend that same policy to K-12 education.

-Of the 43 available tax credits in Indiana three benefit higher education and NONE directly benefit K-12 schools. (the only one that could be said to benefit K-12 education is through the donation of computer equipment.)

-One of the state’s most successful tax credit programs is the 21st Century Scholars Program, which gives individuals and corporations a tax credit that creates scholarships for low income Hoosier students who maintain a good GPA to attend a public or private Indiana university.

-Individuals can claim a 50 percent state tax credit (up to $200) for donating to Marian College or St. Mary of the Woods College, but nothing for donating to Holy Angels Parochial school or the Fort Wayne Lutheran schools. Corporations can claim up to a $1,000 credit.

-The state’s tax credit programs do not discriminate against religious institutions.

-Individuals and corporations can receive a tax credit for contributions to 27 religious colleges. Between 1998-2005 individuals and corporations participating in the Indiana Colleges and Universities tax credit donated more than $67 million to religious colleges.

-Students who receive scholarships through the 21st Century Scholars Program can attend the Indiana religious or public university of their choice.

-Tax credit programs are efficient, effective and great value for money

-The total cost to the state of all tax credit programs is quite small. Between 1998 and 2005, the total value of state tax credits claimed represented only about 4 percent of total taxes.

-In 2005, the year the most recent data was collected, $282 million in tax credits was awarded. To put this in context, $282 million is almost $200 million less than IPS received in 2005.

-Even though these dollars did not flow to the state, the funds were directed to and encouraged private investment in efforts to advance the needs and interests of Hoosiers.

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