Tuition Tax Credit Ruling

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Jeremy Tedesco, an attorney for the Alliance Defense Fund which was on the winning side of a U.S. Supreme Court ruling on Arizona’s tuition tax credit law, discusses the Court’s decision.

Ted Simons: On Monday the U.S. Supreme Court ruled on a challenge to Arizona's tuition tax credit law. The law gives tax credits for contributions to school tuition organizations; those STOs use the money to provide scholarships to students attending private and religious schools. ASU law professor Paul Bender represented the plaintiffs who say tax credits are an unconstitutional state expenditure for religious schools. He explained that argument Monday on "Horizon."

Paul Bender: The person who makes the contribution has to pay the money to the state or to an STO. He cannot keep it. How can you say money is somebody's money when they can't keep it? It's the state's money, it's money that taxpayer owes the state in income tax. Suppose you owe me $100. I say, don't pay me, pay Joe. Whose money is that that you're paying Joe? It's my money. You owe it to me. I'm telling you what you to do with it. The state says you owe me income tax; you can pay $1,000 of the tax you owe me to an STO. That's the state's money. You wouldn't pay that to the STO if you didn't owe it to me in income tax. So it's money raised by the state's income tax. And to say that as the court did, that the rest of the state's taxpayers have no financial interest in that is absurd.

Ted Simons: The Supreme Court did not render a decision on that argument or any of the merits of the case; instead it ruled that Arizona taxpayers do not have legal standing to challenge the tuition tax credit law. That was a point argued by Jeremy Tedesco, an attorney for the Alliance Defense Fund which represented the Arizona Christian School Tuition Organization. I spoke to Tedesco yesterday about the court's decision. Thanks for joining us tonight on "Horizon."

Jeremy Tedesco: Thanks.

Ted Simons: Let's talk about this law. Describe the law, describe the history of the case.

Jeremy Tedesco: Well actually, it's a long history. The law essentially, a tax credit for tuition program. What it does is it allows individual taxpayers to take a tax credit for donations to school tuition organizations, STOs for short. And you take that credit and the program is funded through that mechanism, and the school tuition organizations accept requests, applications for scholarships from parents who want to send their children to private schools, and then they decide whether they're going to grant those scholarships or not. There's about 50, 53 STOs that exist in Arizona right now.

Ted Simons: The challenge was that the claim that this was giving out state tax revenue for religious schools. Correct?

Jeremy Tedesco: I think the source of the complaint here is the ACLU thought too much money was going to religious schools.

Ted Simons: And the court didn't really address that so much as basically saying, you folks don't have standing.

Jeremy Tedesco: Right. They addressed standing issue and dismissed the case because the plaintiffs lacked standing. The key to that is there was no injury to the taxpayers. The taxpayers have to show their tax dollars were extracted and spent in support of religion was what the Supreme Court said. In order to show an injury, and they couldn't show that because what they're essentially complain ball game in this case is someone else's donation of their private money to a private organization. It would be no different than challenging a tax deduction taken on a contribution to a church.

Ted Simons: The other side would argue though, that if you are diverting money that we all pay into, if all of us pay into that money, that is diverted, that means all of us do have standing.

Jeremy Tedesco: Well, that's a generalized injury -- that's what the Supreme Court is talking about in this case. You can't come to court and say, I'm injured in the same way as everybody else. You have to show distinct different injury from everyone else. And so I think one of the key things here to remember is that this is not the state's money. It's private -- the Supreme Court is clear that this is private money. Essentially what the ACLU and the plaintiffs are trying to do is to say that a private bank account, the money that comes out of it is the same as the money that comes out of the state treasury. And it's not for constitutional purposes. That was the clear holding of the court.

Ted Simons: The court said money belonged to the person who makes this particular contribution. Again, we've had the other side on the program, and their question is, how can it belong to that person if that person can't keep that money? This isn't necessarily -- the way they see it now. A donation, what they say is this is money that would otherwise have gone to the treasury. Would have otherwise gone to -- as tax revenue.

Jeremy Tedesco: Sure - that's always been there, that's not true. It's simply not true. They could do a myriad of things with this money. They could send it to a different organization and get a tax credit. Not even through the STO program. State of Arizona has somewhere around 24 tax credits that you can take. There's also a tax deductions you can take and various exclusions and things. You can choose not to use the money in that way at all. So it's fundamentally flawed idea that the only thing you do with this money is send it to the state or send to it an STO.

Ted Simons: Or the idea I would imagine you would say would be flawed as well, that money that taxpayers owe the state makes it the state's money.

Jeremy Tedesco: Well, I think one of the fundamental mischaracterizations of the case, and what the ACLU really premised the whole thing on is that the idea that your money really belongs to the state, as soon as you earn it, and the state chooses what it gives back to you. That's a fundamental difference for from what I understand America to be about, and that is you keep what you're earn. And the government taxes you to the extent that they do, but it's your money, it's not the state's money. And what they're saying essentially is that any money that could be taxed is the state's money. That's not a correct statement of the law.

Ted Simons: OK. So when they say this is not like a donation, because a donation means it costs you something, when you donate something, again, the other side says, it doesn't cost you anything, because this is money would you have owed otherwise. You say, and the court says, not so much.

Jeremy Tedesco: Well, there's no difference between a deduction and a credit. The court was very clear on that. I think one of the most interesting parts of the oral argument was when justice Alito said to Paul bender, what's the difference between this and a deduction? And he tried to explain this credit is a hundred percent, dollar for dollar deduction may be 30 cents on a dollar. So justice leader said what if it approaches a dollar, what if the deduction becomes 99 cents on the dollar? Or even more? Is it then the state's money? And Paul said no. It's not. It's still at that point private money. That's a distinction without a difference. If you're getting 30 cents on the dollar or a dollar on a dollar, it doesn't make any contributional difference for whose money it is. It's still your money.

Ted Simons: With this ruling now, does anything change as far as private school tuition tax credit programs in Arizona?

Jeremy Tedesco: No.

Ted Simons: Nothing fundamentally changes? Does it open the door for other avenues?

Jeremy Tedesco: It opens - well what it does it is protects the right of parents to be able to control the education of their children. Which is really what this is all about. And it does that by prohibiting groups like the ACLU from challenge can these programs with -- by simply grabbing a taxpayer and saying, would you like to file a lawsuit and going to federal court and challenging the law they don't like. That's what these cases are. I don't like this program as a matter of policy, so I want to file a lawsuit. You can't get into court more after this ruling if that's the only injury so called injury you can claim. So what it does it is protects Arizona's program from future lawsuits based on that theory, the ACLU if they want to challenge this program again is going to have to find a plaintiff with a real injury, which will be really difficult for them to do.

Ted Simons: I was going to say, it does -- because of the standing thing, you can still find a apparent who might say, my kid wanted to go to this school, couldn't because of this reason, X and Y, we can't go ahead and start all with this wouldn't you?

Jeremy Tedesco: Well, it's potentially -- it's possible that they could find a plaintiff and file another case. But if their injury claimed injury is that the person couldn't get a scholarship to say a nonreligious school. It's going to be very difficult if not impossible for them to show that that was because of any kind of religious discrimination. Or because there's a concentration of funds going towards religious schools. If you look at the actual numbers, over 80% of students in Arizona choose to go to a private religious school. Yet the numbers of the funds flowing to school tuition organizations that give scholarships to religious based schools is only 65% of the funds go to those STOs. You've got less funds going to STOs that give to religious schools than students who want to go there. And there's other things in the record showing that where there's waiting lists for STOs, those waiting lists are predominantly people who are waiting to get a scholarship to religious schools. So everybody is in the same boat if they can't get a scholarship.

Ted Simons: All right Jeremy, thank you for joining us. We appreciate it.

Jeremy Tedesco: Thank you.

>> That's it for now. I'm Ted Simons. Thank you so much for joining us. You have a great evening. Captioning performed by LNS Captioning

Jeremy Tedesco:Alliance Defense Fund;

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