A US Supreme Court case challenging Arizona’s religious school funding program evolved into a debate over whether money from a tax credit is still the government’s money even after it has been channeled by taxpayers into a private program.
It is not a minor point.
In oral argument on Wednesday, Paul Bender, a Phoenix lawyer for taxpayers opposed to the Arizona program, said the tuition assistance plan is unconstitutional because it amounts to a distribution of government funds to subsidize religious education.
Arizona taxpayers may claim a $500 tax credit when they make a donation to help underwrite private school tuition – including tuition at religious schools.
Supporters of the program maintain that the donation and tax credit are the result of a private decision that does not entangle government in any direct support for religious schools.
Opponents say the Arizona system is designed to channel government tax credit money in a way that bolsters religious schools. They say it is unconstitutional government support for religion in violation of the First Amendment’s establishment clause.
As in prior cases involving government and religion, the justices appear to be deeply split. The court’s liberals generally are highly suspicious of interactions between government and religion, while the conservatives are less suspicious.
When Bender made his point about tax credit money being government money, several conservative justices challenged the assertion.
“That is a great leap,” Justice Antonin Scalia said. “Any money the government doesn’t take from me because it gives me a deduction is government money?”
Bender said there is a difference between a tax deduction which is made with the taxpayer’s own money and a tax credit, which merely reduces the total amount already owed on a tax bill. “Here the taxpayer owes that money to the government,” Bender said.
“The money in this case is not a charitable contribution,” he added.
“This is a very important philosophical point here,” Justice Samuel Alito said. “You think that all the money belongs to the government except to the extent that it deigns to allow private people to keep some of it?”
“No,” Bender replied. He said if the tax credit is taken from money already due, any donation to the tuition program is a payment with government funds.
Justice Anthony Kennedy, a potential decisive vote in the case, said he had “some difficulty” with the idea that an individual spending money the government doesn’t take as a tax is nonetheless still government money.
He said it would be like after accepting a 10 percent senior discount at a restaurant, hearing the cashier advise you to be careful how you spend her money.
At issue in the case is a private school tuition tax credit system set up in 1997 by the Arizona legislature. The system is designed to encourage parents and other Arizona residents to contribute to private school education in the state.
The program requires that donations be made to a School Tuition Organization (STO), which are private, non-profit groups set up to award scholarships from the donated funds. In 2009, there were 53 STOs. They received $51 million in donations.
Here’s the controversial part: Roughly half of the STOs only award scholarships to religious schools. In addition, most of the donated money flows through STOs that award scholarships at religious schools.
The key question in the case is whether Arizona’s program amounts to a government benefit program that favors religion, or whether it is a private choice program (set up by government) in which it is the private actors whose personal choices favor religion.
Justice Kennedy asked Paula Bickett, a lawyer for Arizona, whether all the government-imposed rules for STOs might not render their subsequent decisions the equivalent of government action in support of religion.
Justice Elena Kagan followed up with a similar query. How is it possible, she asked, that the STOs are able to use religious criteria to award scholarships, when it would be clearly unconstitutional for the state to do so?
“The state is not making those decisions,” Bickett replied.
In 2002, the Supreme Court upheld a school voucher program in Cleveland that provided assistance directly to parents to place their children in the school of their choice. The high court said the fact that some parents would choose to use the government money for a religious school did not violate the establishment clause.
The decision that directed the money to a religious school was a private decision, not a government decision, the court said.
The same question arises in the Arizona case.
A federal judge upheld the Arizona tax credit program, but a panel of the Ninth US Circuit Court of Appeals reversed. The appeals court ruled that the Arizona program was not one of “true private choice.”
US Solicitor General Neal Katyal urged the court to uphold the tax credit program. He said the Arizona taxpayers challenging the case lacked legal standing to bring their lawsuit. Their challenge is merely a policy dispute by Arizona residents who object to the state’s program, he said. “Their complaint is that somebody else’s money is not being spent enough."
The case before the high court was consolidated from two lawsuits. They are Arizona Christian School Tuition Organization v. Winn (09-987) and Garriott v. Winn (09-991).
A decision is expected by the end of the term in June.