December 29, 2017

NPR: This Tax Loophole for Wealthy Donors Just Got Bigger

media mention

One of the changes, according to the Institute on Taxation & Economic Policy, which advocates for a “fair and sustainable” tax system, allows far more wealthy donors in 10 states to turn a profit through “donations” to private school scholarships.

Yes, you read that right. If your income is high enough, you can actually make money by giving away money to support scholarships to private schools. The states affected by this provision are Alabama, Arizona, Georgia, Kansas, Montana, Oklahoma, Pennsylvania, Rhode Island, South Carolina and Virginia. …

“The SALT cap is going to open up this scheme to lots of rich people who couldn’t use it before,” Carl Davis of ITEP tells NPR. ITEP’s report calls this “abuse.”

Davis calculates that among the top 1 percent of earners, the number of taxpayers who could be eligible would at least double, from roughly 36 percent to 82 percent.

Some groups are celebrating this change. Jason Bedrick is director of policy of EdChoice, which advocates for school choice policies including tax credit scholarships. “There is no ‘abuse’ in taking a legal federal deduction for making a donation to help low-income children attend the school that works for them,” he tells NPR and points out that some states have dollar-for-dollar tax credits for other kinds of charitable donations too. However, he says, EdChoice would just as soon see the loophole closed. “We’d be fine if the feds decided not to let taxpayers deduct charitable contributions for which they received a tax credit.” Read more