Bruce Murphy
Murphy’s Law

The Tax Handout for Rich Kids

State's “neo-vouchers” reimburse wealthy for kids at elite private schools.

By - Apr 18th, 2017 10:37 am
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University School of Milwaukee.

University School of Milwaukee.

The annual tuition for University School of Milwaukee is $18,835 for first grade and rises to $26,065 for twelve grade. That’s unaffordable, of course, for most people. The school is meant to be an elite, private institution that serves a very select clientele — mostly the children of wealthy CEOs, doctors, lawyers and the like. Wealthy families choose to pay such tuition because they feel it’s worth it for such a specialized institution.

But beginning with the 2014 tax year, that suddenly changed, and average taxpayers began to subsidize this separation of wealthy students from the common schools that serve most of us. A law supported by Republican legislators and Gov. Scott Walker gives families sending their children to private schools the ability to recoup some of that spending through a tax deduction of up to $10,000 annually for high school tuition and $4,000 per year for elementary school tuition.

It’s one of the most generous such subsidies ever passed by a state, and most of the money goes to the well-to-do. A recent analysis by the Wisconsin State Journal found the wealthiest 13 percent of taxpayers in the state collected almost $8 million — or 66 percent — of the $12 million in tax deductions awarded.

“A total of 20,560 tax filers making more than $100,000 claimed the exclusion, receiving a tax cut of about $388 per filer,” according to state Department of Revenue statistics, the newspaper found. Another 16,750 filers earning less than $100,000 claimed the deduction, with an average tax savings of $235.

In 2014, the article reported, the top 13 percent of taxpayers collected 65 percent of the tax handout for parents of private school students.

These kind of tax breaks have been called neo-vouchers by the liberal Institute on Taxation and Economic Policy. Rather than awarding money directly to families, as with a traditional voucher, the money comes through a tax credit or deduction, something particularly suitable for well-to-do taxpayers. The direct payment of vouchers makes more sense for low income families who were originally targeted, as they wouldn’t be able to pay the tuition upfront and wait for a tax credit.

Back when Wisconsin legislators were considering passing this law, Adam Emerson of the Fordham Institute told Governing magazine its passage would be a “significant development” for the school choice movement.

“It’s been highly controversial to do this, so most states just haven’t gone there,” he noted. “They tend to favor programs that tend to benefit low-income families. I think once people get in between the lines and realize what this is, you’re going to see a lot of opposition.”

Ah, but Wisconsin quietly passed this program as a budget add-on (added by then state Sen. Glenn Grothman), with no study and little discussion, which has become a common pattern under Walker and the Republicans. And Walker, Senate Majority Leader Scott Fitzgerald (R-Juneau) and Assembly Speaker Robin Vos, (R-Rochester) all declined to comment in response to the State Journal’s story, also pretty common for the state’s leaders.

Back in 2013 Fitzgerald claimed the tax cut would boost private school enrollment, thereby reducing the “huge tax burden” of educating students in public schools. But if that was the goal, why not target poor and middle-class families discouraged by the price tag for private schools. Why include the well-to-do taxpayers who have become the main beneficiaries and don’t need the tax write-off to pay for private schools?

The State Journal notes that in the 2014-15 school year, private school enrollment increased for the first time after six straight years of decline, from 119,801 to 123,104, or about 3,300 students, but that enrollment stayed about the same in the 2015-16 school year. Whether the tax handout helped cause that one-year blip in private school enrollment is impossible to say. Certainly Fitzgerald didn’t seem eager to discuss the issue.

State Superintendent of Schools Tony Evers assailed the legislation when it was first proposed, calling it “welfare for the rich.”

“It’s taking money out of the system that would normally go to public schools,” he told the Milwaukee Journal Sentinel. “If you and I were billionaires and were sending our kids to high-tuition high schools, we would… get the tax credits for that. It’s obviously not progressive and it’s going to hurt our public schools.”

Evers asked Walker to veto the provision and the governor declined to do so. But I can find no comment from Walker ever explaining why he backed the program.

Democrats have charged the private school tax break is just one more example of Republicans supporting tax cuts that benefit the wealthy and reduce available dollars for public education. They also point to the ballooning Manufacturing & Agriculture tax credit, almost all of which has gone to the wealthy.

“All of this is tax money that could be going to our public schools,” Senate Minority Leader Jennifer Shilling (D-La Crosse) told the State Journal.

Has this tax handout resulted in any savings in education costs to offset the loss of taxes? Why give the tax break to the wealthy? Should taxpayers subsidize schools that choose to teach crackpot theories like creationism rather than the science of evolution? These and other questions aren’t getting discussed because Republicans won’t talk about it, and the media has offered little coverage of the issue.

The Milwaukee Journal Sentinel’s contribution to this discussion has been… peculiar. The newspaper eagerly gave us its Politifact conclusion chastising Evers’ contention that the private school tuition tax break was “the most generous in the nation” as only “half-true.” But its own analysis, when you read the details, shows that no state in the country then offered a more generous tax break.

And so Evers, the only one to explain his stance on the legislation, is criticized — wrongly — for his alleged inaccuracy, while the failure of Walker and other Republicans to offer any explanation for their support is ignored. I’m guessing that made it much easier to pass this handout for the wealthy.

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25 thoughts on “Murphy’s Law: The Tax Handout for Rich Kids”

  1. John Casper says:

    Great reporting, thank you.

  2. Mike Bark says:

    This is hardly a news story. This tax break has been on the books for a few years now and it’s not unlike the tax break offered for Section 529 plans. Most people who contribute to these college savings plans for their kids are pretty well off.

    So the parent who sends their kids to University school is getting a tax break that amounts to $675 or so and in the meantime is paying plenty of income taxes and property taxes to support a school system they don’t even use.

    People choose to send their kids to private schools for many different reasons. Our kids go to Christ King school in Tosa mainly because we value Catholic education and send them there at a financial sacrifice many parish members aren’t willing to undertake. Some in Milwaukee make the sacrifice to send their kids to private schools because they want no part of MPS. Regardless of why they make the choices they do (and you can tell Bruce doesn’t like people who make money) the fact that they get some type of tax break all whilst paying a bunch of other taxes doesn’t strike me as a big deal.

  3. Mike Bark says:

    This tax deduction (it’s not a credit Mr. Evers) has been on the books for a few years now and is not unlike the tax deduction the State offers for contributing to a college savings plan for their kids and trust me, most of the people that are doing that aren’t poor.

    So the person who sends their kid to University School (or really any private high school like Pius, Marquette, TM etc. as the deduction is capped at $10,000) gets a tax break that amounts to $675? In the meantime they are paying all sorts of income taxes and property taxes to help subsidize a school system that they opted out of. This is a big deal?

    Certainly we get that Bruce doesn’t like rich people and thats why he cited University School in his example, but people make the choice of private over public school for a ton of different reasons and a relatively small amount of tax savings isn’t one of those reasons.

  4. Vincent Hanna says:

    This is hardly an attack on rich people. That is nonsense and distracts from the points he is trying to make. It’s not even an attack. It’s asking whether or not the wealthiest people in the state should receive a tax break for sending their kids to an elite private school. How is that not a valid question? If it’s no big deal why was it done in secret with as little debate as humanly possible? If it’s no big deal why won’t elected officials defend it on the record? Don’t be disingenuous Mike and act like this is an unfair attack on wealthy people.

  5. Tom says:

    Dear Mike Bark,

    This was news to me.

    Tom

  6. Woof Woof says:

    Mike – this is newsworthy – it’s never been broken down in such a manner. Using the tuition of Unversity School provides quite a picture of how absurd this law is.

    So 20,000 X $388

    You do the math – millions of $$ that would be going to public schools.

    Frankly there is no reason millionaires should be getting a $388 tax break. Did they ask for it? The truth is when you pull milliions from the general fund it impacts public schools in a negative manner.

    So Mike – if the tax break isn’t one of them then why do we have it.

    There’s another story here though. Look at the cost of going to University School. How can it be that smart students from wealthy backgrounds cost so much to educate? If it costs these well off students who have been given everything in life $26,000 per year then why are conservatives BITCHING about public schools for children in poverty with needs far greater costing $14 grand a year?

    The only reason Walker did this was to get campaing donations from the wealthy. I think your reasoning is barking up the wrong tree. : )

  7. mike drew says:

    It’s a ripoff. Once again, Walker makes sure that them that them that have get,even more,,insuring that they’ll lkeep paying him off with campaign donations.
    And now our Education Secretary will keep this going on the national level..
    Will the voters ever wake up? .

  8. tim haering says:

    He played it right hand
    But made it too far
    Became the special man, then we were Scottie’s band

    Bruce, it’s trickle down. The gravity of money. The more you have the greater your mass, the more it flows to you. IT’s natural.

    Let’s be natural
    Ever since the world began
    Let’s be natural
    Every woman, every man
    Let’s be natural
    As follows nature’s plan
    Let’s be natural

  9. Tim says:

    Walker will allow a deduction up to $10,000 for wealthy children in private schools but not for day care. He is very clear about his priorities.

  10. SteveM says:

    Woof is spot on. It would be interesting to compare that list of 13%ers to the campaign contributions report. Walker’s gotta spend our money to make money.

  11. Woof Woof says:

    Spot on Tim and Steve.

  12. Mike Bark says:

    Tom,

    It’s a tax deduction that has been around for 3 years. Not sure it’s newsworthy at this point.

    Tim,

    Wisconsin has a deduction for childcare expenses, so people are getting subsidized to have people watch their kids.

  13. Mike Bark says:

    Woof Woof (haven’t heard that in a while)

    I don’t think the people sending their kids to University School were clamoring for this deduction. That said, I’m guessing more middle class people who live in Milwaukee and use a school like Pius, St. Joan’s, TM etc. might appreciate the little bit of help that the deduction gives.

    Wisconsin has all sorts of tax deductions that it may or may not need, but it’s ones like this that get scrutinized and it’s getting scrutinized with the least sympathetic of examples in University School. I don’t think it’s all that much different than the College Savings deduction or the childcare deduction we have, so if this one is bad, let’s get rid of those too.

  14. Jason says:

    My first thought on this subject is my amazement of how many Millionaires go to the University school. Its as if Liberals see them every where with their top hats and three piece suits. Like Leprechauns guarding their pots of gold. Note to liberals most wealth is in blue states or districts. See California, Washington DC and New York What do we define as a Millionaire in Wisconsin? We know Chris Abele pays little in state taxes, so is it simply owning a home in River Hills. Last I saw this is an area won by Hillary Clinton. Bruce Murphy attacks the Democrats…Extra Extra read all about it. Is n’t this story really about protecting the monopoly known as public schools. As property taxes have sky rocket over the last generation middle class families have been forced to give up God in schools so we can satisfy the wants and needs of the public bureaucrat.

  15. Vincent Hanna says:

    That is a whole lot of incoherent nonsense in one long paragraph. I am grateful that my efforts to force god and the baby jesus out of public schools was successful. That was a tough fight.

  16. Thomas says:

    Mike Bark’s comparisons between the private school tax break and 529’s and child care tax credits are not equivalent. A person need not be rich to put, say 50 bucks a month into Edvest to get a tax deduction. The child care tax credit is modest, but it is appreciated by working parents with kids in daycare.

  17. Mike Bark says:

    Thomas,

    I’m sure working parents appreciate the modest tax reduction they get from the private school deduction as well. The child tax deduction piggy backs on a Federal tax credit and the $3,000 a year for a child is very similar to the amount someone gets for sending their kid to a private grade school. The tax deduction really only escalates once a child reaches high school. And at least the people getting subsidies for that are helping to subsidize the public schools through their property taxes and income taxes. Why am I subsidizing your child care?

    I would also say in my experience in doing tax returns over the last 20+ years the 529 college plan is primarily used by wealthy people who are putting the maximum every year and not by people who are throwing a few bucks in.

  18. Vincent Hanna says:

    Mike you came out guns blazing, attacking Bruce and suggesting he was unfairly lambasting wealthy (leave the makers alone!) in a vociferous defense of the rich. Then after pushback you admit that the rich probably didn’t ask for this and that middle-class parents would likely appreciate some additional help while noting that this particular tax break is being highlighted because it benefits the rich. You are all over the place. What’s your agenda? Some people seem so sensitive about any perceived criticism of the wealthy. Did this feel like a personal attack on you or something?

  19. Edith Wagner says:

    Pun or no pun, love this sentence.
    “It’s one of the most generous such subsidies ever passed by a state, and most of the money goes to the well-do do.”
    Do-do, indeed!

  20. Edith says:

    Pun or no pun, love this sentence.
    “It’s one of the most generous such subsidies ever passed by a state, and most of the money goes to the well-do do.”
    Do-do, indeed!

  21. Mike Bark says:

    Vincent,

    The issue is people seem to pick and choose the tax breaks they like and they tend to like the ones that apply to themselves personally. So if you don’t send your kid to a private school you may be inclined to think this is a hand-out for the “rich” and Bruce carefully wrote this article so it would come across this way. He chose to highlight a school that is extraordinarily wealthy instead of one that is not.

    My point is Wisconsin gives out all sorts of special interest types of tax deductions. We have one for child care. We have one for college savings. We have one for health savings.

    Why is the school deduction the one that people seem to have a problem with?

    As for agenda, I’d just like to see tax stuff be reported with all the facts and without an agenda. In all the taxes I’ve done, I’ve never met a liberal or a conservative who ever said “maybe I shouldn’t take that deduction because it’s not fair”. Getting a tax break is the one thing that unites us all.

  22. Bruce Murphy says:

    Edith, thanks for pointing this out, we corrected what we hope was not a Freudian slip.

  23. Vincent Hanna says:

    Your post suggests that he should have written about every tax break to be fair. That’s not how it works and that’s a misguided viewpoint.

    The issue isn’t whether or not someone should take advantage of a tax break offered to them. People on both sides of the political aisle are very concerned with tax breaks for the wealthy and advantages only available to the rich. That concern is nonpartisan at the moment, Bernie and Donald and all that.

  24. Jason says:

    I drove by Marquette High school today(34th and Wisconsin) with past graduates such as Tom Barrett and Sheriff David Clarke or as Bruce Murphy pointed out the “rich people”. I see no track and field, no swimming pool, just a shabby looking school with a mini athletic field compare this with the public meccas around the city and suburbs.

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