On Tuesday, the Wall Street Journal reported on a Supreme Court case involving tax breaks for people who gave charitable donations to support organizations that provide scholarships to private schools, many of which have religious affiliations. At issue was whether or not the tax breaks were legal since some religious schools were involved.
The article also reports:
"By a 5-4 vote, the justices ruled that Arizona taxpayers have no right to allege in court that the state's tax-credit program violates the First Amendment prohibition of government "establishment of religion." The decision upheld the program without addressing the allegation that it is unconstitutional, and effectively overruled decades of precedent permitting lawsuits against government programs that subsidize religious institutions through tax incentives."
There are a number of other states that have similar programs--Florida, Georgia, Indiana, Iowa, Pennsylvania and Rhode Island.
The Wall Street Journal reported the following from the written decisions:
"Writing for the majority, Justice Anthony Kennedy explained that the exception applied only to government appropriations intended to subsidize religion. "A dissenter whose tax dollars are 'extracted and spent' knows that he has in some small measure been made to contribute to an establishment [of religion] in violation of conscience," Justice Kennedy wrote.
"In contrast, a tax credit implicates funds never collected in the first place. "When the government declines to impose a tax," Justice Kennedy wrote, "there is no such connection between dissenting taxpayer and alleged establishment."
"In her first major dissent, Justice Elena Kagan called the distinction between tax appropriations and credits "arbitrary." "Either way, the government has financed the religious activity. And so either way, taxpayers should be able to challenge the subsidy," she wrote, joined by the court's three other liberals."
There is another aspect to this case. As the discussion of the budget deficit heats up, I believe that the charitable contributions deduction will come under close scrutiny. At this point, charitable donations to both religious and secular organizations may be looked at to be eliminated to raise more revenue. This would be a huge mistake--many church and secular organizations perform vital work providing medical care, food, and housing for the poor and elderly. To cut their funds at a time when the government may be forced to cut its own programs would be a serious error in judgment. The only way it would make sense would be if the overall tax rate was dropped significantly in conjunction with the elimination of these deductions. The danger there of course is that the tax rate could be raised later after the deductions were taken out.
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