- The Washington Times - Tuesday, January 20, 2004


The Supreme Court debated yesterday whether federal judges can block state tax breaks, like one that helps fund private religious schools in Arizona.

Arizona residents get income-tax credits for donating money for private school education. Those contributions fund grants and scholarships and are part of a state effort to give parents more choices in educating their children.

A group of Arizona taxpayers sued the state in federal court, arguing that the tax credits are an unconstitutional promotion of religion.

Arizona’s appeal asks justices if federal courts can intervene when state judges and policy-makers find no problem with tax schemes.

The state has the backing of 40 other states, which want their taxing decisions protected from federal lawsuits. The Bush administration also supports government funding for private parochial education.

The Supreme Court argument focused on taxes, not religion.

Arizona Attorney General Terry Goddard told justices that the state’s tax credits cannot be challenged in federal lawsuits because of a 1937 law that says federal courts may not interfere with the “assessment, levy or collection” of state taxes.

The Supreme Court, under the leadership of Chief Justice William H. Rehnquist, has frequently sided with states in cases like this one that test the balance of power between the federal government and states.

Some conservatives seemed supportive of Arizona, but Chief Justice Rehnquist told Mr. Goddard the statute appeared better suited to property tax, not income tax, as the state argued.

The San Francisco-based 9th U.S. Circuit Court of Appeals had ruled that federal courts can hear constitutional challenges of state income-tax credits. Arizona argues that those lawsuits belong in state court. The state’s tax break allows a dollar-for-dollar credit of up to $500 for an individual and $625 for a married couple.

Elliot Mincberg, legal director of the liberal People for the American Way Foundation, said that if Arizona wins the case, “states could basically do anything they wanted through their tax system.”

The Supreme Court is not using the case to consider if the Arizona tax credits are constitutional.

The credits were passed five years before the court’s 2002 ruling that tax money can be used to pay tuition at private or parochial schools if parents retain a wide choice of where to send their children.

Marvin Cohen of Scottsdale, Ariz., the attorney for the taxpayers who sued, told justices the state is using the tax credit to funnel much of the money to religious schools. He said in a filing that the program is very different from the one blessed by the court in 2002.

Mr. Goddard said 44 states have some type of income-tax credit and are worried about extensive federal court fights.

Justices will rule before July in this case, as well as a separate one that asks if states can refuse to give college scholarships to students studying religion, when grants are available for non-religion majors.

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