The House failed by a vote yesterday to approve a tricky add-on to the treasurer’s department budget to provide a significant financial benefit to people with children in private schools.

The vehicle is a change in the 529 savings plan, originally intended for college savings, but expanded on the federal level to allow federal tax-exempt withdrawals for K-12.

Sen. Jason Rapert cooked up an amendment, added in special language, to give Arkansas taxpayers a deduction up to $5,000 for 529 contributions ($10,000 for a couple filing separately on the same return). The federal law doesn’t allow deduction of 529 contributions from taxable income. It does allow earnings to accumulate tax free.

Confusion about the proposal was rampant in the House yesterday. Advocates continued to misrepresent how the program works. They argued, too, about how’d primarily benefit. For that, we have a pretty good answer, an analysis on similar legislation in Iowa


In Iowa, as in Arkansas, the prooposed change was estimated to cost state tax revenues more than $5 million. That is, $5 million that otherwise would go to the state in support of public schools and other public services would go to private school tuition.

Who would benefit? You can see from the Iowa table that people making more than $100,000 a year would reap two-thirds of the benefits. (Median family income in Arkansas is about $40,000.)


Here’s a letter explaining the Iowa program. If you think five Arkansas legislators could explain this, you didn’t listen to the House debate yesterday.

And here’s the spreadsheet from Iowa on how the benefits would be spread among the various classes of taxpayers.

The shell game voucher program has failed twice in the House. It’s unclear if they’ll try again today to get the final vote. Without it, there’s no approval of the treasurer’s budget, but there’s still plenty of time to put that in place for the year beginning July 1, another piece of misrepresentation yesterday by those anxious to encourage a transfer of tax dollars to private schools.