When, over the years, proponents have put forward various tuition tax credit schemes, opponents have customarily responded by interposing in front of the merits the tax credit's supposed constitutional invalidity. The record is strewn with flat assertions that all tuition tax credits are unconstitutional, when even a cursory review of the Supreme Court's rulings reveals a complex - some would say contorted - approach.
At the very least, the Court has displayed considerable sensitivity to intention and design as well as-the "economic result" which so obsesses those who think in terms of "parochiad"51 and measure all proposals solely by their immediate material effect upon religious schools. In the landmark Nyquist decision of 1973,52 which disallowed a New York program of tax credits and tuition grants, the justices reflected that tuition tax benefits were "...a recent innovation, occasioned by the growing financial plight of (parochial schools) and designed, albeit unsuccessfully, to tailor state aid in a manner not incompatible with the recent decisions of this Court."53 But - "It is equally well established," said the Court elsewhere in Nyquist, "that not every law that confers an 'indirect,' 'remote,' or 'incidental' benefit upon religious institutions is, for that reason alone, constitutionally invalid."54
Tuition tax credit architects like Sen. Daniel Patrick Moynihan have done little to dispel the perception of tax credits as a form of subsidy to non-public schools. Arguing typically for tuition tax credits to shore up the precarious finances of parochial schools, these proponents lend support to the Supreme Court's supposition that if the option of direct state aid were available in any substantial way, they would exploit it.55
Confronted by tax credit proponents with this continuing straightforward challenge to the Supreme Court's Nyquist decision, lower courts since 1973 have taken little heed of Nyquist's nuances in their rush to affirm the high court's prohibition against aid to parochial schools. Proponents' truculent demands for such aid have unwittingly led the courts to adopt a virtual presumption that tax credits must represent some kind of subterfuge, focusing judicial interest on the question of material benefit to the detriment of other considerations.
This is a mistake in concept and objectives which the Clark campaign educational tax credit does not share. The Clark tax credit, as will be detailed below, advances primarily the free exercise of religious and educational liberty, and only incidentally the welfare of schools.
The School-Aid Cases
Nyquist was preceded by a number of significant cases which sought to apply the First Amendment to the area of state involvement in parochial education, or which bore upon related questions. Everson v. Board of Education (1947)56 allowed state reimbursement of parochial students' bus transportation fares, and Board of Education v. Allen (1968)57 state authorities' loaning secular textbooks to parochial school children. Tilton v. Richardson (1971)58 upheld federal grants of funds for the construction of facilities to be used for clearly secular purposes in non-public institutions. In the words of the Nyquist decision, this line of cases "simply recognizes that sectarian schools perform secular, educational functions as well as religious functions, and that some forms of aid may be channeled to the secular without providing direct aid to the sectarian."59 That such "secular" aid admittedly freed up more of the schools' own money for sectarian purposes was held to be of little import, for "an indirect and incidental effect beneficial to religious institutions has never been thought a sufficient defect to warrant the invalidation of a state law."60
In its Nyquist argument before the Supreme Court, the State of New York relied heavily also upon a 1971 case, Walz v. Tax Commission,61 in which New York's property tax exemption for religious, charitable, and educational organizations was upheld.
In applying the precedents to Nyquist, the Court evinced a three-part test of constitutionality which continues in force today. First, the statute in question has to reflect a legitimate secular purpose. Second, the primary effect of the statute should neither advance nor inhibit religion. Finally, the statute should avoid excessive entanglement between church and state.62 Seeing in the Nyquist measure a scheme to aid the parochial schools of New York State, the Court decided that Nyquist's primary effect was to advance religion, and thus held the law unconstitutional.
Three relatively recent cases reveal that these tests have not since been substantially fleshed out; a degree of inconsistency still reigns over the way in which they are to be balanced. In 1978 a three-judge federal court upheld a 1955 Minnesota statute which allowed parents of students attending public and private schools to claim up to $700 per year as a deduction against their state income tax returns. In Minnesota v. Roemer63 the three-judge panel concluded that this educational tax benefit was constitutional because "...the statute is neutral and neither advances nor impedes religious activity, benefits the parents of children attending both public and non-public schools, has received unchallenged historical acceptance, and is analogous to the long recognized practice of tax deductible contributions to religious and charitable causes..."64 Yet a late 1979 challenge of a similar statute in Rhode Island Federation of Teachers, et. al. v. Norberg resulted in a federal district court's throwing out the tax deduction after finding that fully 93% of the students currently affected attended parochial schools.
Mid-1979 saw another of the Nyquist statute's progeny thrown out, as the U.S. Supreme Court affirmed without opinion a lower court ruling disallowing a New Jersey tuition tax benefit measure.65 The New Jersey law would have allowed a $1,000 tax deduction for any state taxpayer with a child in private or parochial school. A New Jersey taxpayer with $20,000 income and one child in school would have saved $20 in state taxes; still, the appeals court noted that "an insurmountable obstacle" to the law's validity was that it served to advance religion. The New Jersey decision left hope that a tax benefit applicable, like Roemer, to both public and private school families might enjoy greater acceptability.66
Educational Tax Credits: The Test of Effects
The educational tax credit avoids the pitfalls of tuition tax benefit measures because it is essentially new in concept.
The educational tax credit is a tax credit which may be taken by any federal taxpayer, individual or corporate, for educational expenses. Beneficiaries are limited to those under 21 but are not otherwise restricted. Educational expenses are intended to take in a far broader class of expenditures than mere tuition, in order to encourage maximum choice.
Upon consideration it becomes clear that many of the customary responses to narrow tuition tax credit proposals do not apply here.
It will not do, for instance, to point out that the immediate effect of the educational tax credit would be to allow a federal income tax credit to those who already have children in sectarian schools. This is inadequate for a number of reasons. First, like the Minnesota tax deduction but for its own reasons, the educational tax credit necessarily applies to educational expenses in public as well as non-public schools; examples of these include non-core curriculum or remedial class tuition, sports fees, field trip fees, laboratory fees, etc.67 Second, the educational tax credit by its nature applies not only to the entire panoply of institutional educational choices, but to the non-institutional ones as well: the Calvert courses,68 directed-study on leave from school, home tutoring. Because the growth of these alternatives is already underway and little capital is required to insure their expansion, it is simply not possible to show on the facts that the primary practical effect of the educational tax credit is to benefit existing parochial, or even expanded parochial schools.
Finally, if we assume that the coercion implicit in the existing tax and spending structure relative to education is so hotly defended by members of the public education establishment at least in part because the consumers of its output are unwilling patrons, then any survey of the practical benefit of the educational tax credit must take into account a probable market shift. In questions of market shift it is customary to consider not only existing competitors (which are the product of a historical situation) but potential ones which are likely to arise as the result of the operation of the proposed policy change.
It is axiomatic, and thus a valid presumption, that, ceteris paribus a policy change the magnitude of educational tax credits will induce dramatic changes in the demand for, and supply of, educational alternatives. Taking these into account means seeing the measure in light of its own consequences, rather than "arguing from ignorance" that the historical major educational choices are all we can identify for purposes of assessing the practical effect of tax credits.
This approach makes it most difficult to conclude, as did six justices in Nyquist, that any educational tax credit must accrue to the benefit of a single religious group.
The Entanglement Test
Particular note should also be paid to the Court's Nyquist language in regard to Walz, the 1971 case wherein property tax exemptions for many non-profit organizations, including religious ones, were upheld. Walz stood for the proposition that "a proper respect for both the Free Exercise and the Establishment Clauses compels the State to pursue a course of 'neutrality' toward religion." Governments, said the Court, "have not always pursued such a course, and oppression has taken many forms, one of which has been the taxation of religion. Thus, if taxation was regarded as a form of 'hostility' toward religion, 'exemption' constitute(d) a reasonable and balanced attempt to guard against those dangers."69
New York State sought to analogize the statute in Nyquist to that in Walz by arguing that the New York tax credit/grant program disencumbered religious choice. For two reasons the Court found this argument insufficient.
First, special tax benefits could not be reconciled with the neutrality required by the First Amendment.70 Because the New York law did not explicitly single out sectarian schools for tax credit, eligibility, the meaning of "special" tax benefits may amount to nothing more than a reiteration of the Court's suspicion of arrangements that confer primary benefit de facto upon religion. On this interpretation, a showing of merely incidental benefit to parents of sectarian school attendees might be sufficient for a tax credit measure to escape the label of "special tax benefit." A stricter interpretation, which would require that the tax credit apply in concept to expenses in public as well as non-public schools, or even to non-tuition educational expenses, as well as tuition, is also possible and is satisfied by the provisions of the educational tax credit.
The second rock upon which a Nyquist-Walz analogy foundered was the Court's contention that the "indirect and incidental benefit" conferred upon religion by Walz was "the product not of any purpose to support or subsidize, but of a fiscal relationship designed to minimize involvement and entanglement between Church and State."71
Turning to the law in Nyquist, the justices concluded that "the granting of the tax benefits under the New York Statute, unlike the extension of an exemption, would tend to increase rather than limit the involvement between Church and State."73 Looking beyond the possibility of such bureaucratic interventions, the Court admitted to no small apprehension about the divisive political competition which could result from institution of subsidies to religious schools. While this objection to the Nyquist statute proved not controlling, having been overshadowed by the effects test, there is little doubt that entanglement weighed heavily upon the justices' minds.74"The exemption," the Court emphasized (in Walz), "tends to complement and reinforce the desired separation insulating each from the other" (citations omitted). Furthermore, "elimination of the exemption would tend to expand the involvement of government by giving rise to tax valuation of church property, tax liens, tax foreclosures, and the direct confrontations and conflicts that follow in the train of these legal processes."72
The prospect of minute government supervision of non-public schools was again raised when federal tuition tax credits came before Congress in 1978. In hearings before the House Ways and Means Committee noted constitutional attorney William B. Ball warned that "it is greatly to be feared that if the 'accredited or approved' language were adopted, the state educational bureaucracies would see in it new vistas for enlargement, new regulatory projects for 'getting geared up'..."75 Ball recommended that any standard for school eligibility rest upon existing statutes governing establishment and operation of schools, rather than upon new accreditation language which could be used to restrict choice.
Similar thinking went into the construction of the National Taxpayers union California educational tax credit initiative where NTU took the approach of making tax credits applicable to educational expenses at any school able to enroll students under the 1979 state education code. Fearing likely efforts by the California Department of Education to tighten accreditation standards, NTU went so far as to prohibit further restriction of educational alternatives via the education code.76
Basing the eligibility of various schools' tuition and/or educational expenses upon existing state codes avoids the quagmire of new accreditation standards, but not without a cost. The codes vary from harsh to minimal regulation; an open market in educational choices should be allowed, while increasing avenues of relief against fraud. Too, reliance upon multifarious existing state definitions of "legitimate" educational institutions handicaps equal application of a federal income tax credit for educational expenses from state to state. Therefore, in its statutory form the educational tax credit will necessarily introduce a definition of educational expenses broad enough to accommodate a wide range of alternatives, while at a minimum prohibiting the states from impairing application of the educational tax credit by increasing present accreditation restrictions or denying its use for one or another of the educational alternatives now allowed to satisfy the compulsory education laws.
In a deeper sense the educational tax credit proposal answers the Court's concern about sectarian strife by providing a pressure relief valve for the pent-up anger and tension which millions of parents already feel about their lack of educational options. In particular the tax credit can reduce the incentive to do battle over what values are taught in the public schools.
Senator Moynihan released a conversation he had with Vice President Mondale in April 1979 while both were listening to the fractious Senate debate over legislation which would have restored prayer to the public schools by denying the Supreme Court jurisdiction over the issue:
Were tax credits proposed and designed to subsidize sectarian schools, or primarily these, the possibility would still exist that political competition over such "aid" would lead to strife overshadowing the reduction in tensions occasioned by increased educational liberty, thus tipping the balance of the entanglement issue against the measure. Educational tax credits are, however, quite unlike the Nyquist statute - and not merely one element in a conceptually and fiscally unrestrained "aid to parochial schools" package. Their application to the wide range of educational expenditures takes them beyond the realm of parochial school tuition to encompass every educational option, and their monetary impact is naturally restricted by individual tax liabilities.He and I talked a bit about the debate, and I remarked that while I was opposed to the amendment I could readily understand how Americans, religious people, would be uncomprehending of government that seemed to deny them what they would regard as the free exercise of religion in the schools...A plural school system, with a strong church-related sector, would avoid the kind of agonizing choice the Senate was facing that day, the choice between seeming to thwart the religious preferences of the people and seeming to circumscribe the power of the Supreme Court to rule on whether our fundamental rights are being infringed by government...77
The Test of Public Purpose
To this point, we have noted that the educational tax credit, by virtue of its emphasis upon "expenses" rather than mere "tuition," leads to inclusion of a broad class of educational choices under the credit. As important as this is, the educational tax credit can be distinguished from tuition tax credits in a more fundamental way: the educational tax credit, like the New York tax exemptions upheld in Walz, is a comprehensive, integrated Program the design of which fosters educational free choice and opportunity.
We have already noted that the accrual of benefits to religious education is at most an indirect, incidental occurrence. Indeed, we go further: the proportion of benefits spent upon education for internal family members as opposed to external "charitable" expenditures, is of no import as far as the educational tax credit is concerned. Nor is it greatly of interest to the tax credit's proponents, who seek, among other things, to revive the vitality and educational influence of extended families and community groups, and who are also at pains to loosen the State's virtual monopoly on education.
Thus the tax credit applies to educational expenses incurred by any taxpayer (including corporate donors) without regard to the familial or social relation of the beneficiaries. This is also why, in relation to the existing law, the educational tax credit can be seen as replacing the currently allowed deductions78 for charitable educational contributions and erasing the artificial restrictions upon who may benefit from such deductible giving.
This approach suggests that the line between charitable contributions and expenditures designed to attain personal objectives is at best a shaded one, and that in the case of expenditures made for children's education, the difference between son and nephew, or between any other two beneficiaries, is not so precise or important as to provide the rationale for obstructing maximum educational opportunity.
Hence, unlike prior narrow tuition tax credit proposals, the educational tax credit is a general charitable tax credit of broad conceptual as well as factual applicability which facilitates a recognized public purpose. In this respect it is very much like the conceptually broad tax exemptions held in Walz.
Tuition tax credit proponents have at various times tried to depict their measures as having more than narrow application, employing arguments which sometimes bordered on the disingenuous. Review has understandably concentrated on swatting down these subterfuges.
Rhode Island, for example, argued that because a tuition tax benefit applied in public as well as non-public schools, it possessed broad application; however, with 93% of Rhode Island's non-public school students attending sectarian schools (and the statute failing to provide tax credits for more than token non-tuition expenses) the Federal District Court harshly dismissed this reasoning as "window-dressing."79
Similarly, New Jersey contended that its tuition tax deduction was part of broad block of exemptions passed as a unit to benefit an entire class of taxpayers regarded as likely to have "added expenses."80 In rejecting this defense the three judge federal panel noted that the existence of conceptually unrelated tax benefits8l alongside the Nyquist statute had not saved the day for the New York tuition tax benefit scheme.82 In neither the Rhode Island nor the New Jersey case was there a showing that the benefits falling upon religious education were incidental to a broad program to aid education or to promote some other recognized public interest; rather, the states argued tangential points, and thereby lost.
What cannot be demonstrated under a narrow tuition tax credit, but can be provided by tax credits for a wide range of educational expenses, is proof that free choice and educational opportunity, rather than the welfare of the schools, come first. This proof is vital to constitutionality.
Conclusion: The Educational Tax Credit's Constitutionality
In sum, the educational tax credit differs dramatically from previous narrow tuition tax credit proposals, and meets all three tests for constitutionality delineated by the U.S. Supreme Court in Nyquist: the test of primary effects, the test of entanglement, and the test of public purpose.
Constitutional attorney William B. Ball had this to say about the NTU California educational tax credit proposal, and his comments apply with equal force to the Clark measure:
...Let me state, in very short form, why I believe that the Proposal is absolutely constitutional.The Proposal does not run counter to any previous Supreme Court decision. The decision of the Court in Committee for Public Education v. Nyquist, 413 U.S. 756 (1973) is not a case in point. The statute considered in Nyquist contained a formula whereby the net benefit to the beneficiary was indistinguishable from a tuition grant. That feature is not present in the Proposal. Further, the "tax credit" feature struck down in Nyquist was only part of a comprehensive "aid to parochial schools" statute and appeared to the Court to be an inseparable part of such a package. Finally, the Nyquist statute was held by six members of the Court, to benefit a single religious group predominantly. That cannot remotely be said of the Proposal.Putting aside now, as indeed is proper, any objection based on Nyquist, we come to the heart of the matter so far as constitutionality is concerned. Quite plainly the Proposal would write into the California Constitution a provision giving wider scope to personal liberties. There has been a widespread propaganda that a public monopoly in education is so imperative that it must override the enjoyment of basic constitutional liberties -- such as the right to know, parental choice of schools, the rights of privacy, initiative and creativity in education, religious freedom, and rights of enterprise in education. The propaganda has caused a hobbling of these rights and now brings them face to face with extinction. That is due to the rising inflation and saturating taxation. These rights are becoming paper rights. Americans should not be told: "You may exercise your basic rights only if you impoverish yourself to do so."