In a 5-to-4 decision, the high court said the taxpayers lacked the necessary legal standing to bring their lawsuit.
The action sweeps away a ruling by a federal appeals court panel that had struck down the tax credit program as a violation of the First Amendment’s ban on government establishment of religion.
The majority justices did not directly address the larger constitutional issue. Instead, the 19-page decision written by Justice Anthony Kennedy focuses on whether the complaining taxpayers had suffered a direct and personal injury from Arizona’s religious school tax credit program.
Justice Kennedy drew a sharp distinction between government expenditures from the general treasury that directly benefit religion versus tax credits that provide individual citizens an opportunity to decide for themselves whether to direct the credited funds to a religious school.
“When Arizona taxpayers choose to contribute [to the tax credit program], they spend their own money, not money the state has collected from respondents or from other taxpayers,” Kennedy wrote.
“Arizona’s [tax credit law] does not extract and spend a conscientious dissenter’s funds in service of an establishment [of religion],” he said.
“On the contrary,” Kennedy said, “respondents and other Arizona taxpayers remain free to pay their own tax bills, without contributing to [the religious school tax credit program].”
A narrow interpretation
The decision is important because it signals the intention of five members of the court to enforce a narrow interpretation of when taxpayers may be permitted to file lawsuits seeking to prove the government is engaged in unconstitutional support for or entanglement with religion.
In a dissent, Justice Elena Kagan said the decision will make it harder for ordinary citizens to challenge government actions that they feel violate the First Amendment principle of government neutrality concerning religion.
“Appropriations and tax subsidies are readily interchangeable,” Kagan wrote. “What is a cash grant today can be a tax break tomorrow.”
She added: “The court’s opinion thus offers a road map … to any government that wishes to insulate its financing of religious activity from legal challenge.”
Praise for ruling
Supporters of the tax credit program praised the ruling.
“Today’s decision marks the fifth time in recent years that the Supreme Court has rebuffed efforts by school choice opponents to use the courts to halt programs that empower families to choose a private school education,” said Tim Keller, executive director of the Arizona Chapter of the Institute for Justice.
Opponents of the program expressed disappointment and concern.
“This decision puts taxpayers’ rights to challenge many government subsidies to religion in extreme jeopardy,” said the Rev. Barry Lynn, executive director of Americans United for Separation of Church and State.
“The court, with the full support of the Obama administration, has slammed the courthouse door in the face of Americans who don’t want their tax dollars to subsidize religion,” he said.
Under the Arizona system, taxpayers may claim a $500 tax credit when they make a donation to help underwrite private school tuition – including tuition to a religious school.
Opponents of the system said it was designed to channel government money from the tax credit to religious schools. A program that primarily benefits parochial schools is a violation of the First Amendment’s prohibition on government endorsement of religion, they said.
How tax credit benefits religious schools
The tax credit system was set up in 1997 by the Arizona legislature. It is designed to encourage parents and other Arizona residents to contribute to private school education.
The program requires that donations be made to a School Tuition Organization (STO), a private, non-profit group set up to award scholarships from the donated funds. In 2009, there were 53 STOs. They received $51 million in donations.
What makes the program controversial is that 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.
Opponents see the tax credit system as a government benefit program to advance religion. Supporters view it as a mechanism that allows private individuals to decide whether their tax credit will be used to benefit a religious school or not.
The appeal involved two cases consolidated for argument at the high court. They were Arizona Christian School Tuition Organization v. Winn (09-987) and Garriott v. Winn (09-991).
“It is easy to see that tax credits and governmental expenditures can have similar economic consequences,” Kennedy wrote. “Yet tax credits and governmental expenditures do not both implicate individual taxpayers in sectarian activities.”
“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,” Kennedy said.
“When the government declines to impose a tax, by contrast, there is no such connection between dissenting taxpayer and alleged establishment,” he said. “Any financial injury remains speculative. And awarding some citizens a tax credit allows other citizens to retain control over their own funds in accordance with their own consciences.”