In 2012, New Hampshire established a Scholarship Voucher System to provide state support to qualified students wishing to leave the public school system. It is funded by an 85% credit to corporations, on their NH Business Profits Tax, for donations to approved scholarship funds. We have read that the corporate response has been minimal to date.
In an effort to expand this program, HB 1686 has been introduced in the 2018 session and is now being considered in the House. It would allow individual taxpayers the same 85% credit for such contributions against their individual interest and dividends tax bill.
If this bill becomes law, it would allow high-income individuals to turn, what is for federal tax purposes an essentially non-deductible state tax payment, into a deductible charitable contribution at a significant cost to NH state revenue. (Example: Taxpayer A, 66 years old, earns $100,000 in interest and dividend income. He owes NH 5% in taxes on this income less $3600, or $$4820. Under HB 1686, he could contribute $4820 to an Education Scholarship Fund, receive an 85% credit from New Hampshire on his tax bill, and deduct the full $4820 as a charitable contribution on his federal tax return (assuming he itemizes deductions)). Under this scenario, NH loses tax revenue of 85% of $4820 or $4097 while Taxpayer A may actually save money. This can become a significant tax-avoidance scheme that essentially results in state revenues going to private school tuition payments.
SB 193, passed by the NH legislature and currently before the Senate Finance Committee, establishes an expanded voucher system supported directly by the NH General Fund and indirectly by the local public school system from which the student departs (property taxes will surely be raised to fund all or part of the lost state funds). SB 193 voucher funds may be used for private, religious, and home schools.
Both SB 193 and HB 1686 are designed to allow students to leave the public school system, while taking state and local money with them. Their ultimate goal, as far as we can tell, is to replace some of the country’s best public school systems with a publicly funded mix of private, religious, and home schools.
HB 1686 and SB 193 are being pushed by conservative Republicans, bolstered by money from outside groups with an anti-public school agenda. Even if you subscribe to the position that school choice is a right, it should not be our taxes that pay for your non-public school choice. Sometimes “Live Free or Die” has unintended consequences: your asserted freedom to choose a school for your kids, paid for by public funds, results in a collective loss to the majority of the citizens of the State of New Hampshire.
We should all be concerned.
Marie D. Nardino