Students in rural areas are unlikely to see many benefits from a plan to provide private school scholarship tax credits. The proposal to be debated on Tuesday, LB 753, would allow a tax credit for donations to an organization that provides scholarships for students attending private and parochial schools.

Panelists in an OpenSky webinar earlier this year noted how tax credits, voucher programs and other school privatization measures implemented in other states have ballooned in costs and consequences.

What’s in the proposal?

As proposed, LB 753 would give a tax credit to any person or business entity that makes a donation to a scholarship granting organization, so long as they don’t also claim that donation as a deduction. That means someone who gives a $100,000 donation and who has at least $200,000 in income tax liability could claim a tax credit equal to their full donation. Their income tax liability would be dropped to $100,000.

That same $100,000 donation to a public school foundation, however, would only allow the donor an income tax deduction, reducing the amount of income on which they’d pay taxes by at most $6,640.

Credits are capped at $100,000 annually for individuals and businesses and at $1 million for estates and trusts.

The bill would initially commit $25 million a year to funding the tax credits but could grow to $100 million annually, reducing state revenues available to support public schools. 

Similar measures in other states

In Arizona, a scholarship tax credit program that resembles the tax break contained in LB 753 was initially proposed with a small cost in 1998. Today it reduces state revenues by $250 million a year.

For decades, residents of rural areas in Nebraska have asserted that public schools are crucial to their communities, where private education options are often limited or non-existent. This means students must go to public schools that could now face funding issues caused by public dollars being diverted to privatization programs.

Watch the OpenSky webinar: