So let's say your state is out of money, and you have a new Governor who has a mandate to reduce taxes and spending. But you want to spend some more money on pet programs? How do you do that?
How about if you spend taxpayer money, and pretend it came from the private sector? Welcome to New Jersey's Opportunity Scholarships.
The Opportunity Scholarships, designed to aid students in failing schools, would be funded by contributions from companies in exchange for dollar-for-dollar tax credits.
New Jersey's Opportunity Scholarship Act
Permit me to Translate this "contributions from companies in exchange for dollar-for-dollar tax credits" language:
So let's say Company X gives $100,000. Then they can tout publicly: hey, my company does wonders for the community, look at this $100,000. But when tax time comes, they just deduct this entire amount from what they are paying the state in taxes. So the money is not coming out of Company X's pocket at all. The same result would have happened if the government collected the $100,000 in taxes, and then contributed it to these scholarships.
So then your new Governor can say "look, I spent $100,000 less in taxes, and cut/didn't raise spending. And I got this new pet project passed, which just uses private money -- isn't the private sector wonderful? Much better than government taxing and spending."
Now, tax credits are nothing new. Sometimes they are given as an incentive for a company or an individual to do something the government wants. But this is more like government money laundering -- the company making the fake donation and receiving the tax credit has nothing to do with the program itself; it is just a way for the government to pretend it is not taxing and spending.
Now, do the Tea Partiers -- the Taxed Enough Already Party -- object to this new taxing and spending programs? No, it comes from "good" private contributions rather than "bad" taxing and spending, so they are all for it -- look at Tea Party favorite's:
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