High Court Weighs Tax Credit For Religious Schools

At the U.S. Supreme Court on Wednesday, the justices heard arguments in a case that challenges Arizona's system for providing scholarships for children to attend private, often religious, schools.

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From NPR News, this is ALL THINGS CONSIDERED. I'm Michele Norris.

ROBERT SIEGEL, host:

And I'm Robert Siegel.

The Supreme Court heard arguments today in a case that comes from Arizona. It challenges the state's system that provides scholarships to children to attend private, often religious, schools.

Here's NPR legal affairs correspondent Nina Totenberg.

NINA TOTENBERG: The state's subsidy comes in the form of tax credits awarded to people who give money for student scholarships to private schools, many of them religious.

A tax credit differs from a tax deduction. The credit comes right off the tax bill on a dollar for dollar basis. So you get 100 percent of the amount off your taxes. In contrast, for a charitable deduction, you get no more than a third.

On the steps of the Supreme Court today, lawyer Paul Bender, representing those challenging the law, contended that Arizona's system illegally subsidizes religious schools.

Mr. PAUL BENDER: Sixty-five percent of the whole program went out on the basis of religion. You get this scholarship only if you send your kid to the religious school that I designate.

TOTENBERG: But David Cortman of the Arizona Christian Schools Tuition Association disagreed.

Mr. DAVID CORTMAN (Arizona Christian Schools Tuition Association): Not a dime goes to any school, religious or secular, unless the parent decides, number one, that their child will attend that school; and number two, that they apply for a scholarship.

TOTENBERG: Inside the courtroom, the first question was one that extends far beyond this case, Arizona, or even school funding issues.

The question is whether taxpayers have legal standing, meaning the right to challenge in court, a government action that they allege violates the constitutional separation of church and state.

The Obama administration, represented by acting Solicitor General Neal Katyal, contended that taxpayers have no such right to go to court because the money here went to private groups that in turn handed out the tuition grants.

Justice Ginsburg: Does anyone have standing to challenge this scheme? Answer: No.

Justice Ginsburg: Isn't the underlying premise of our precedents that the provision of the Constitution banning state establishment of religion will not be enforceable unless we recognize taxpayer standing?

Justice Kagan: Counsel, if you're right, the court was without authority to decide a whole line of cases, many of them recently. Katyal agreed.

Justice Kennedy seemed incredulous: You agree those cases were wrongly decided? Katyal said, yes, he did.

Defending the Arizona statute on the merits was state appellate lawyer Paula Bickett. She said the tuition tax credit law is similar to dozens of other state laws that provide for tax credits.

Justice Kagan: Why didn't Arizona simply enact a voucher system for parents, a system that the Supreme Court has already upheld in other cases? Answer: Because Arizona's Constitution does not allow direct aid to private schools. So this system uses tax credits as a sort of pass-through to student tuition organizations, or STOs.

Justice Kennedy: Suppose one of these STOs discriminated on the basis of race. Would there be a federal constitutional violation? Answer: It's a private organization. So without state action, there's no constitutional violation.

Kennedy pushed back: You don't think the state provides the mechanism to finance the funding? Justice Ginsburg noted that in 1983, the court ruled eight to one that a private school that discriminated on the basis of race was not entitled to tax-exempt status for its donors.

Justice Kagan: If Arizona had a straight tuition voucher program, it couldn't deny vouchers, for instance, to Catholics. So if the state can't do that itself, why can it do it through intermediaries that exist for no other reason than to administer this program?

Bickett replied that the tax credits are not the state's money and thus that private individuals and groups can spend the money as they want.

But lawyer Paul Bender, representing the taxpayers who are challenging the program, disagreed. He contended that tax credits, unlike tax deductions, come right off a taxpayers due bill. In other words, that without the credits, the money would go to the state government.

That assertion was like waving a red flag in front of the court's conservatives. Scalia, Roberts, Alito and Kennedy erupted in a chorus of dispute.

Justice Kennedy: I must say that I have some difficulty that any money the government doesn't take from me is still the government's money. Justice Alito: You think that all the money belongs to the government, except to the extent it deigns to allow private people to keep some of it? I do not, insisted Bender, but his contention seemed to fall on deaf ears.

Nina Totenberg, NPR News, Washington.

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