Tuition tax credit, STO articles, part 2

by David Safier
The 3rd and 4th article in the East Valley Tribune's series, Rigged Privilege, came out Tuesday. The stories contain further evidence of the abuses of tuition tax credits by both private schools and School Tuition Organizations. Schools teach parents how to skirt law details some outlandish behavior by schools and STOs and is worth reading. Charity survived indictments to help poor, unfortunately, is a slip in quality from the other articles. It's confusing — I read it twice and some parts still don't make sense to me — and a few of its conclusions appear to be wrong.

Much as I'm grateful for the Trib's investigative reporting, which reveals lots of information I didn't know, unfortunately, I've seen some evidence of shoddy analysis and occasionally slipshod reporting. However, I more than forgive them for their occasional lapses. Most of the reporting is quite good, and the series, combined with what has been written in the Republic, is shocking enough that, in a rational, logical world, some people should be paying stiff fines and others should be looking at jail time.

You can read the articles yourself, I won't summarize them. But I want to draw an analogy. Our current worldwide financial near-collapse is a function of the deregulation of the financial sector. Republicans and some of their Democratic enablers said, let's give banks and investment companies free rein so they can create profit. They'll regulate themselves, courtesy of the "invisible hand of the marketplace," because, after all, they want to keep their profits going in perpetuity. They won't kill the goose that lays the golden eggs.

What they did was kill the goose, cut it up, fry it in a pan and sell it to themselves for hundreds of billions of dollars, long after the golden eggs had disappeared. Then they said, "We had no idea . . ." when the goose grease hit the fan.

Arizona's tuition tax credit and STO system was purposely created without regulatory restrictions by the anti-regulation conservatives who wrote the law. They too believe in the self-regulatory powers of the invisible hand of the marketplace. It's clear many of the people involved in the schools and STOs were either ignorant or contemptuous of basic tax law — or both — and ridiculously extravagant with taxpayer money. Their flaunting of the rules was audacious and blatant — written on their websites and in their brochures — and some of the characters used the tax credits as their personal piggy banks. Yet understaffed state and federal tax auditors left them alone, and the Attorney General's office said, it's not our job to police them. Not until some citizens revealed blatant abuses of the system did the mainstream media sit up and take notice.

Self regulation doesn't work. Carefully written laws and well staffed regulatory agencies are essential to keep capitalism from destroying itself by way of unbridled greed. This is true in finance, in the food industry, in the automobile industry, in the defense industry, and just about everywhere else. It's certainly true in this whole tuition tax credit/STO complex of schools and credit/scholarship middle men.

If I had my druthers, the whole tuition tax credit legislation would be wiped off the books. But those people who believe in this stuff are still in the majority, so at the very least, they should feel an obligation to clean house by curbing the abuses and bringing some of the most blatant abusers to justice.