The Talk: ESAs A Rex Money-Maker?

During session one of the whisper campaigns against the educational savings account proposal was that it was a giveaway to big donors.  Because Rex Sinquefield has long championed educational reform, his name was mentioned in the hallways.

Now comes a New York Times article pointing out that in several states with ESAs – including Arizona which many held up as an example – donors actually make money on their contributions.  See it here.

Pull Quote: In these states, individuals and corporations donate to nonprofit “scholarship-granting organizations,” which then distribute the funds to parents. The amount of the contribution can be subtracted dollar-for-dollar from the donor’s state tax bill. The state-level programs began in 1997, and in 2011, the Internal Revenue Service allowed taxpayers to deduct the contributions from their federally taxable income as well — a benefit that has largely been kept within the circles of wealth advisers and private school communities… Nine states that allow both a federal tax deduction and a state dollar-for-dollar credit are Alabama, Arizona, Georgia, Montana, Oklahoma, Pennsylvania, Rhode Island, South Carolina and Virginia, the report said. In these states, the report found, donors can even make a profit.

In South Carolina, if taxpayers make a $20,000 donation to a scholarship organization, they not only get a $20,000 state tax credit, but a federal tax deduction valued up to $7,000. The donor could pay $27,000 less in taxes based on a $20,000 donation.


Indeed Sen. Andrew Koenig’s SB313 would have given donors a 100% deduction on their state taxes, meaning with the federal deduction that’d net positive for the contribution.


Originally in May 18 MOScout.