More on Daines-Gianforte Tax Scam: Making Money on Donations to Discriminatory Private Schools

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One of the reasons we should reject the idea of tax reform happening in the dead of night, without public input, is simple: it gives politicians the opportunity to slip in provisions that would outrage the public and take away their right to lobby for changes before the bill becomes law. While we’re certainly going to hear more of these every day, NPR is reporting today about one such provision that will not only cost public schools $40 million dollars, but enrich Montana’s own Greg Gianforte, who because of an expanded loophole in the law, could actually profit from donations to private schools like his Petra Academy.

It’s a complicated scheme, but NPR explains the giveaway using a hypothetical millionaire in South Carolina:

ITEP uses the example of a multimillionaire living in South Carolina, which has few limits on such donations. She could give $1 million to a scholarship funding organization, which in that state goes to pay for private school scholarships exclusively for students with special needs. As a result, she would get that $1 million taken off her state tax bill.

But here is where things get interesting. According to ITEP, she, and donors in 10 states that have similar rules, could then turn around and claim a federal charitable tax exemption on the same donation.

The new top federal income tax bracket is 37 percent. That means, in total, the South Carolina donor could get back $1.37 million in exchange for $1 million, ITEP calculates. That is a better risk-free return on investment than you’re likely to find anywhere.

The Institute on Taxation and Economic Policy says that the impact of this expanded loophole will be felt most in states like Montana:

In the short-run, the impacts of this expanded federal tax loophole will be felt most acutely in states such as Alabama, Kansas, Montana, Oklahoma, and Virginia. Taxpayers in these states have shown only limited enthusiasm for existing voucher tax credits, and the expanded federal loophole could very quickly change that fact. Alabama, for instance, allows $30 million in state tax credit payouts each year, but as much as $10 or $20 million of that amount has gone unclaimed as of late.[16] Meanwhile Kansas had $9.5 million in unused tax credits last year, while Montana had roughly $2 million, Oklahoma had about $2.5 million, and Virginia had approximately $15 million.

Overall, ITEP argues that the loophole represents a $50 million dollar windfall for private schools that will expand pressure to develop voucher programs:

The result could be an immediate $50 million windfall for private schools, and a push by state lawmakers to dramatically expand voucher tax credits to keep up with increased demand.

And that’s the kind of tax policy Mr. Daines and Gianforte have crafted and shilled for: one that, despite their claims of simplicity and fairness, carves out exemptions for wealthy donors to private schools, serving three aims: enriching themselves, defunding public schools, and channeling more money into private schools that discriminate. As we have reported on here repeatedly, Mr. Gianforte was the primary founder and funder (as well as Board Chair) for Petra Academy, a school that will certainly benefit from this loophole and one that has a deeply discriminatory policy towards students with disabilities. And now Gianforte has voted to turn the tax code into a giveaway to those schools and wealthy donors like himself.

That Mr. Gianforte wants to advantage private schools is no surprise and a matter of public record, but it should certainly shock even his conscience to support a tax bill that turns donations to those schools into an opportunity for profit. Perhaps a reading of Mark 8:36 is in order for Mr. Gianforte sometime soon.

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About the author

Don Pogreba

Don Pogreba is an eighteen-year teacher of English, former debate coach, and loyal, if often sad, fan of the San Diego Padres and Portland Timbers. He spends far too many hours of his life working at school and on his small business, Big Sky Debate.

His work has appeared in Politico and Rewire.

In the past few years, travel has become a priority, whether it's a road trip to some little town in Montana or a museum of culture in Ísafjörður, Iceland.

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