Because the statute is written to target the lowest 6 percent of schools, Katzerman argued, there will always be "feeder schools" for this credit. "And no matter how well a school performs, they'll grade you on a curve and the lowest 6 percent will be on this list.”
Alabama is now one of 13 states to offer some form of scholarship tax credit program, according to the National Council of State Legislatures. The basic scholarship tax credit program allows a corporation of individuals to essentially earmark a piece of their tax liability to go to tuition scholarships.
The program is "means tested," which means in this case that scholarship recipients must fall below 150 percent of the state's median household income and have family income below 200 percent of the federal poverty level.
The incentives to donate vary from state to state. Some give a 100 percent credit, making the donation cost free. Others offer only smaller credits, requiring a donor to put more skin in the game. Either way, tax credits are a much juicier incentive than a tax deduction, which would only incrementally reduce tax liability for the donor.
According to the Alabama Policy Institute, Alabama's policy is mixed. Businesses get half their donation back in an income tax credit, up to 50 percent of their tax liability. Individuals get an income tax credit of 100 percent of their donation, up to half percent of their tax liability, not to exceed $7,500.
The upshot is that for individual donors, up to a certain limit, the donation is costless.
To get a court to consider striking down the new law, the SPLC had to find a constitutional angle, which it accomplished by arguing the program violates "equal protection."
The SPLC's clients are families who say they cannot afford to leave the failing schools, even with the $3,500 refundable tax credit. The effect of the law, Katzerman said, is to create two classes of students: those who can afford to leave, and those who are "trapped in failing schools without any opportunity to transfer out."
"Two classes of students?" responds Jason Bedrick, an education policy analyst at the Cato Institute. "That already exists." Bedrick argues that rather than exacerbate the inequities, the scholarship program helps to reduce inequity. It's not a silver bullet, he argues, but neither does it make the inequity worse.
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