Carl Davis writes in “The American Prospect” that tax credits for private scholarships have become a scheme for money-laundering to benefit the wealthy.

“Some states, in their zeal to subsidize private schools, have created an egregious tax scam that allows wealthy taxpayers to profit by donating to private school scholarship funds in return for lucrative tax credits.

“Many states have constitutional provisions that expressly prohibit the use of public dollars for private religious schools. To sidestep these prohibitions and public aversion to the practice, voucher proponents and their legislative allies in 17 states have created generous tax credits to encourage taxpayers to donate to private school scholarship funds.

“Critics who object that vouchers drain resources away from public schools would be doubly outraged if they knew how these vouchers were, in some cases, fleecing the public till.

“Neovouchers,” as these scholarship funds are often called, have received considerable attention as education policy initiatives, but their full impact as tax policies has drawn less notice. Critics who object that vouchers drain resources away from public schools would be doubly outraged if they knew how these vouchers were, in some cases, fleecing the public till. By offering tax subsidies in exchange for donations to private school scholarship programs, states are using private citizens as middlemen. Rather than include line-items in state budgets for spending on school vouchers, lawmakers ask taxpayers to undertake such spending on the state’s behalf, in return for a generous tax giveaway.

“Incentivizing philanthropy through state tax codes is nothing new, of course. For example, donating $100 to a veterans’ organization, food pantry, or cancer research institute might shave $5 to $10 off a taxpayer’s state tax bill, if the donor claims a deduction for that contribution.

“But with profit-making “neovoucher” schemes, states supercharge the incentive to donate, rewarding charitable gifts to private schools much more handsomely. Louisiana, Oklahoma, Pennsylvania, Rhode Island, and Virginia, for example, all provide tax credits worth between $65 and $95 on every $100 donated. Alabama, Arizona, Georgia, Montana, and South Carolina go even further by providing dollar-for-dollar tax credits: Donate $100, and receive $100 back in tax credits.

“Because taxpayers are also permitted to claim a federal charitable tax deduction on their donations to “neovoucher” programs—even if they were already fully reimbursed for those gifts by their state governments—the result for some taxpayers is a tax cut as large as $1.35 for each dollar donated.

“Like many tax loopholes, this one is not geared toward ordinary taxpayers. A quirk in federal law limits the benefit primarily to high-income taxpayers. So, in effect, a handful of states have created elaborate tax schemes that allow wealthy taxpayers to generate risk-free private returns of up to 35 percent. A one-year, guaranteed return of 35 percent on a legitimate investment is uncommon, and a publicly funded return of that size on a so-called charitable donation is patently outrageous. This perverse use of the tax code on two fronts should raise the ire of taxpayers everywhere.”

Read on to see how wealth managers are advising their clients to take advantage of this tax loophole, which not only subsidizes nonpublic schools but is very profitable for the donor. Three strikes against our republic.

1. Making it possible to do what is prohibited by the state constitution;

2. Legally evading taxes;

3. Disinvesting in public education.