EducationPolicyStudiesLaboratoryDivisionofEducationalLeadershipandPolicyStudiesCollegeofEducation,ArizonaStateUniversityP.O.Box872411,Tempe,AZ85287-2411Telephone:(480)965-1886Fax:(480)965-0303E-mail:HYPERLINK"mailto:epsl@asu.edu"epsl@asu.eduHYPERLINK"http://edpolicylab.org/"http://edpolicylab.orgEducationTaxCredits:NoNetBenefittoArizona’sImpoverishedStudentsby©KevinG.Welner,J.D.,Ph.D.UniversityofColoradoatBoulderEducationPolicyResearchUnit(EPRU)EducationPolicyStudiesLaboratoryCollegeofEducationDivisionofEducationalLeadershipandPolicyStudiesBox872411ArizonaStateUniversityTempe,AZ85287-2411February2003EPSL|EducationPolicyStudiesLaboratoryEducationPolicyResearchUnitEPSL-0302-105EPRUHYPERLINK"http://edpolicylab.org/"http://edpolicylab.orgPAGEiiiEducationTaxCredits:NoNetBenefittoArizona’sImpoverishedStudents©KevinG.Welner,J.D.,Ph.D.UniversityofColoradoatBoulderExecutiveSummaryArizonaallowsastateincometaxcreditfordonationstoschooltuitionorganizations(STOs),whichallocatevoucher-likegrantstostudentsattendingprivateschools(A.R.S.§43-1089).Thestategrantsasimilartaxcreditfordonationstopublicschoolstosupportextracurricularactivities(A.R.S.§43-1089.01).Thetaxcreditseffectivelyallowthosewhoowestatetaxestoreallocatemoneyfromthestategeneralfundtoatuition-grantingorganizationortosupportspecificactivitiesofapublicschool.PrivateschooltaxcreditsfordonationstosupportSTOgrantsarecurrentlylimitedto$625.ResearchsuggeststhattheSTOgrantsmostoftenbenefitaffluentfamiliesandfamilieswhowouldhavechosenprivateschoolsanyway.Arestrictionpreventingtaxpayersfromreceivingcreditsfordonationsbenefitingdependentshasaloophole,inthatdonationsinwhichapairoftaxpayersagreetomakedonationsbenefitingeachother’sdependentsarepermitted.Despiteprohibitionsagainstvariousformsofdiscriminationbyparticipatingschools,theprogramdoesnotforbidreligiousdiscrimination.Advocatesoftuitiontaxcreditsarguethat:(1)thesubsidywilldriveswitchingfrompublictopriv