Ever since Georgia enacted a scholarship tax credit law in 2008, individual and corporate taxpayers in the Peach State could receive dollar-for-dollar tax credits in return for contributions to nonprofit scholarship organizations—at least until the $58 million cap is reached.
Donors are eligible to receive credits starting on January 1st of each year. In 2012, the last of the credits were claimed in mid-August. The following year, donors hit the cap in May. Last year, they hit it in just three weeks. This year, all the credits were claimed within hours of becoming available on January 1st. In fact, taxpayers applied for more than $95 million in credits, $37 million more than the cap.
Scholarship families are highly satisfied. In a 2013 survey of families receiving scholarships from Georgia GOAL, 98.6% of respondents reported being “very satisfied” or “satisfied” with their chosen school.
Clearly, both the demand for scholarships and the willingness of taxpayers to support scholarship students have grown far beyond what the law currently allows. It’s time to raise the cap. Georgia legislators considering pending legislation to raise the cap to $250 million should be encouraged by two additional facts. First, the best evidence suggests that the tax credit law saves money by reducing expenses by more than it reduces tax revenue. Second, two-thirds of Georgians support the scholarship tax credit law. In other words, it’s good policy and good politics.
In other states that cap the amount of scholarship tax credits available—such as Florida, Pennsylvania, and Rhode Island—donors consistently hit the cap each year. Two recent exceptions—New Hampshire and Alabama—highlight the adverse effects of lawsuits on fundraising. After anti–school choice activists sued to block New Hampshire’s Opportunity Scholarship law, donations dropped off precipitously because of the uncertainty about the law’s future. Fortunately, the state supreme court unanimously rejected the challenge last summer, so we should expect a significant increase in donations this year.
In Alabama, scholarship organizations raised only half as much in 2014 as they did in 2013 because of the uncertainty created by government education establishment’s legal challenge. The lawsuit is likely to meet the same end as similar lawsuits in Arizona and New Hampshire, but the plaintiffs are harming thousands of children while the case is being litigated.