Background

Seven states -- Arizona, Florida, Georgia, Indiana, Iowa, Pennsylvania and Rhode Island -- allow some form of a tax credit for corporations that donate to a scholarship fund.  The scholarship funds are used to pay for the tuition of students who otherwise could not afford to attend a private or religious school.

In these seven states, a tax credit program allowed more than 68,000 students to attend a private or religious school in 2005-06 and over $132 million was provided in scholarship funds in 2007. 

Taxpayer Savings

If more students attend a private or religious school, public schools could actually have more funds per student because their enrollment numbers would decrease.  This proposal also avoids the conflict of using taxpayer dollars to pay for private education.  Economic research has shown that each 1 percent reduction in the price of tuition leads to a 1.1 percent increase in private school enrollments. [1] 

An analysis of the Arizona corporate tax credit program found the state of Arizona could save an estimated $57.2 million over a five year period.[2]  More recently, the Florida Legislature’s well respected research arm, the Office of Program Policy Analysis and Government Accountability concluded their tax credit scholarship programs save the taxpayers of Florida $38.9 million a year and allowed over 21,000 students to attend a private or religious school.

States that have implemented a tax credit scholarship program have actually seen instructional spending increase in public schools. 

How Would a Corporate Tax Credit Work in Connecticut?

C corporations would be allowed to donate funds to a scholarship fund that provides aid to students to attend a religious, private or out of district public school.  There would be a statewide cap of $2 million and tax credits would be granted on a first come first serve basis.  Donations would be capped at $50,000 and the “C” Corporation would receive a 100% tax credit.  

Scholarships would only be given to children whose family income does not exceed 250 percent of the income requirements of the federal poverty line.  (A family of four would have an income of less then $55,125 per year.)  Additionally, these funds could only be used to pay for tuition. 

Only students entering kindergarten or transferring to a private or religious school would be eligible for the scholarship.  Scholarships to attend a private or religious school could not exceed $2,500.

Residents from the following towns would be eligible for the scholarship;  Ansonia, Bridgeport, Bristol, Danbury, East Hartford, Enfield, Hartford, Killingly, Manchester, Meriden, Middletown, Naugatuck, New Britain, New Haven, New London, Norwich, Plainfield, Plymouth, Putnam, Sprague, Stamford, Torrington, Vernon, Waterbury, West Haven, Windham, and Winchester.

Business Community

With Connecticut facing a budget deficit and a slowing economy, lawmakers in Connecticut must create ways to improve the business climate.  A tax credit for C corporations is one of many proposals that can have a positive impact on Connecticut’s business climate. 

In addition, businesses in Connecticut have clearly stated that hiring a skilled workforce is a major issue facing Connecticut’s companies today.  Businesses have a vested interest in a quality education for Connecticut students.

In Connecticut’s Catholic schools alone, Students in grades 3-7 take the Iowa Test and regularly score in the average to above-average range. The average SAT score of Connecticut Catholic school students are above the both the state of Connecticut and national average in all three tested areas.  Additionally, 99% of our High School students graduate and those same 99% continue their education or enter the military.