“Taxes are what we pay for [a] civilized society.”

Compania General de Tabacos de Filipinas, The Collector of Internal Revenue

275 U.S. 87 (1927) (Holmes, J., dissenting)

A unique measure enacted recently in Iowa providing parents public funding to send their children to private schools, including parochial ones, owed much to its neighbor to the north: Minnesota. It comes in the 40th anniversary of a pair of tax tussles that reached rival results before the U.S. Supreme Court.

The unprecedented Iowa law, known as the Students First Act (FSA), may become a trend-setter for similar legislation in other states. It comes on the heels of a series of U.S. Supreme Court decisions that have opened the door, rather widely, to use of public funds for religiously based educational institutions. Those trends stem from a Minnesota tax-tuition case decided by the Supreme Court 30 years ago, Mueller v. Allen, 463 U.S. 388 (1983).

With the deadline for filing individual income taxes next week, Tuesday, April 18, a review of these developments, past, present and future, is timely.

Iowa initiative

Marshall H. Tanick

The Iowa measure was the product of an initiative that began three years ago. It was a high-profile issue in the 2022 election cycle and was rushed through the legislature in an extraordinarily rapid three-week span this winter. Championed loudly by Republican Gov. Kim Reynolds, it basically provides a voucher-type system that the governor has described as “school choice” legislation that funds “students rather than a system.” A leading supporter of the measure described it as making the Hawkeye State a “national leader in educational freedom.”

Although unprecedented, the Iowa measure draws from some similar undertakings in other jurisdictions and is likely to be a template for others as part of a trend of extending public benefits to private and religious schools and other institutions.

The law, which allows Iowa parents to receive public money for private school education of up to $7,598 per year for each student, will be phased in over a three-year period. Initially, it will cover low-income families during the first two years, before it is applied across the board; the program is estimated to cost the state about $345 million annually. The statute permits parents to establish what is known as Educational Service Accounts (ESA) to cover private school tuition and related expenses. It is estimated that about 14,000 students will use it initially and that it will reach treble that number in the next few years.

Critics of the measure, mostly Democrats but also some Republican spending hawks, lament that the program will harm public schools and teachers and the unions that represent them, as well as harming rural public schools — while mainly benefiting wealthy families and, of course, those who are religiously inclined. In addition to those pragmatic concerns, objectors question whether the law runs afoul of the Establishment Clause of the First Amendment, which bars government support of religion, although that train seemingly has left the station as a result of a series of earlier rulings by the U.S. Supreme Court.

In a trio of cases over the last few years, the court has upheld various forms of public funding mechanisms for religious schools in three “M” states, (Missouri, Montana and Maine), and they are derived from a case arising in another “M” state — yes, right here in Minnesota. See “New high court religious aid case rooted here” in the Feb. 16, 2022, edition of Minnesota Lawyer.

Despite these shortcomings, or perhaps because of them, the Iowa measure has features that appease teachers. It provides $1,205 to public schools for each student that opts out with an ESA, and it also provides more flexible funding for public school teachers salaries.

The Iowa law, bolstered by the recent trio of Supreme Court decisions, may well be a forerunner for similar legislation in other states. At least five states have measures pending: Florida, Utah, Oklahoma, Nebraska and Idaho. Other states may want to jump on the bandwagon, although Minnesota will probably not be one of them.

Minnesota matters

The unlikelihood that Minnesota will jump on the band wagon is somewhat ironic because the vehicle started here, planting the seeds, to mix a metaphor, of the batch of Supreme Court cases and the Iowa law, too.

The genesis came from the Mueller case, which was decided by the Supreme Court nearly three decades ago on June 29, 1983. It involved a Minnesota law, Minn. Stat. § 290.09, subd. 27, which allowed parents to take state income tax deductions of up to $700 per student for tuition and related expenses paid to private schools, including religious ones. The measure, which dated back in various forms to 1955, was amended on a couple of occasions before it was challenged by a group of taxpayers who contended it violated the Establishment Clause, an argument that was rejected by the U.S. District Court here as well as by the 8th U.S. Circuit Court of Appeals.

The U.S. Supreme Court also rejected it on April 18, 1973, and 2½ months later narrowly upheld the measure 5-4 in a decision written by Justice William Rehnquist. He wrote that the statute commonly referred to as the Parochial Aid law, did not run afoul of the three-pronged established standard for adjudicating Establishment cases in Lemon v. Kurtzman, 403 U.S. 602 (1971). The Mueller ruling deemed the Minnesota statute, which was to be repealed four years later, as not having a “primary effect of advancing religion” and not requiring courts to become excessively entangled in religious doctrine, two of the three Lemon criteria. In sum, the majority concluded that the Minnesota tax credit scheme did not give an imprimatur of state approval to religious schools, but rather constituted aid to their parents.

This rationale did not sit well with the four dissenting judges, led by Thurgood Marshall, who opined that the law had the “primary effect of promoting religion,” which the dissenters deemed “impermissible” under the First Amendment Establishment Clause.

Although subsequently repealed in 1987, the Minnesota measure and the ruling upholding it four decades ago paved the way for the later bandwagon of cases of public funding of religious matters leading up to the Iowa law.

Another appeal

Another Minnesota tax law that fell by the wayside on appeal also arose in the same period as the Parochial Aid law and was decided by the U.S. Supreme Court three months to the day before the Mueller decision and about three weeks before that case was argued before the justices.

The law, Minn.Stat. § 297A.14, provided for a “special use” tax in excess of $100,000, in lieu of sales tax, on newsprint used by large newspapers, based upon their circulation, which essentially boiled down to only one publication, the Star Tribune in Minneapolis. It was enacted, in part, due to disdain by a number of legislators for the liberal and progressive stances taken by the newspaper on various political and social issues, although its legislative history was not conclusive. Despite its murky genesis, or perhaps because of it, the decision by the Supreme Court in Star Tribune Co. v. Commissioner, 460 U.S. 575 (1983), struck down the law on grounds that it violated the First Amendment’s free-press guarantee. The court issued its opinion on March 29, 1983, in a decisive 8-1 ruling reversing a ruling of the Minnesota Supreme Court and holding that it violated the Establishment Clause. Written by Justice Sandra Day O’Connor, the decision deemed the law invalid because it “singles out the press,” a feature holding the “potential for abuse” of First Amendment freedom of expression. That conclusion drew a dissent from a single jurist, Justice Rehnquist no less, who sardonically pointed out that under the “use tax” designed solely for newspapers, the Star Tribune actually paid less than it would have incurred had it been subject to the general sales tax that the “use” tax supplanted.

These two cases, Mueller and Star Tribune, remarkably decided by the high court within a 90-day span, reflect the volatility that existed at that time in tax-related First Amendment litigation, an issue that lately has become fodder for the Freedom of Religion advocates and their supporters on the court, setting the stage for the Iowa measure and others likely to follow it.

PERSPECTIVES POINTERS

Three-part test under the Establishment Clause