Table 1
Amount Donated to and Distributed by Scholarship Organizations
1998
1999
2000
Amount donated
$1,816,299
$13,706,611
$17,246,792
Number of donors
4,247
31,875
37,368
Amount distributed
$167,650
$2,377,319
$12,787,545
Number of scholarships
326
3,726
14,936
Source: Derived from a spreadsheet provided by the Arizona Department of Revenue.
nizations reported 4,247 donations for a
age of taxpayers who used the tax credit in
total of $1.8 million.1 4 By 2000 there were 34
1998, 1999, and 2000. Figure 2 shows the
percentage of taxpayers by income level who
scholarship organizations that reported
used the credit in 1998. As would be expect-
37,368 donations for a total of $17.2 million.
ed, taxpayers with higher incomes have
Scholarship organizations typically
greater tax liability and therefore are more
receive most of their donations toward the
likely to use the tax credit. Although the tax
end of the tax year in December. There is
credit makes scholarship donations almost
often an eight-month lag between the time
costless (up to the $625 limit), individuals
donations are collected and the time they are
still have to be able to write a check up front
distributed as scholarships. Therefore, even
and wait for a tax refund.
though the scholarship organizations
A few companies have set up payroll
received $1.8 million in donations during
deduction programs that allow employees to
1998, only $167,650 was distributed in schol-
contribute throughout the year. For example,
arships during the 1998 school year. Those
20 percent of Londen Insurance Group's
scholarships helped 326 students attend 23
employees signed up for their payroll deduc-
different schools. In 1999 the number of
tion program for the 2000 tax year.1 5 Under
donations to scholarship organizations and
the amount claimed as tax credits increased
that program, employees determine how
dramatically as did the number of scholar-
much they would like to contribute. A pro-
ships distributed.
rated portion of an employee's wages is with-
A few companies
Although the Department of Revenue does
held and is not considered taxable state
have set up pay-
not yet have final figures for 2000, preliminary
income. The employee's paycheck will not
roll deduction
data show that the amount of donations has
decrease as long as his state tax liability is
increased. The Department of Revenue esti-
equal to or greater than the amount con-
programs that
mates that scholarship organizations received
tributed. If other companies adopt similar
allow employees
$17.2 million, a 26 percent increase from 1999.
payroll deduction programs, we could expect
to contribute
Those organizations allocated 14,936 scholar-
to see an increase in taxpayer participation
ships with a total value of $12,787,545 for the
even in the lower tax brackets.
throughout the
200001 school year. The average value was
Figures are not yet available on donations
year.
$856, enough to cover roughly 28 percent of the
by income level for 1999 or 2000, so we
average private school's tuition and a 34 percent
assume that the pattern of giving in the
increase from the average scholarship amount
future will be similar to that in 1998, when a
of $638 for the 19992000 school year.
greater percentage of taxpayers in the upper-
In 1999 roughly 1.8 percent of taxpayers
income brackets than of those in the lower-
used the credit. Figure 1 shows the percent-
income brackets used the tax credit.
4