OLR Research Report

April 20, 2000





By: Benjamin H. Hardy, Research Analyst

You asked us for a summary of the U.S. Supreme Court case, Mueller v. Allen (103 S.Ct. 3062 (1983)), that upheld a Minnesota income tax deduction for school expenses such as tuition at private schools, including religious schools. You also asked which other states allow deductions to taxpayers who send their children to religious schools.


In Mueller v. Allen the U.S. Supreme Court held, in a five-to-four decision, that a Minnesota statute allowing taxpayers to deduct expenses for “tuition, textbooks and transportation” of their children attending private and public elementary or secondary schools did not violate the Establishment Clause of the U. S. Constitution's First Amendment by providing financial assistance to sectarian institutions.

Plaintiff taxpayers sued the Minnesota revenue commissioner and taxpayers who had taken the deductions for parochial school expenses. The federal District Court granted summary judgment for the respondents, holding that the statute was neutral and without a primary effect of advancing or inhibiting religion. The Appeals Court affirmed.

In affirming the lower courts' rulings, the Supreme Court ruled the deduction (1) had secular purposes in that it ensured citizens' education and assured financial health of both sectarian and nonsectarian private schools, (2) did not have the primary effect of advancing sectarian aims at nonpublic schools, despite plaintiffs' data alleging the statute's application to tuition primarily benefited religious institutions, and (3) did not excessively entangle the state in religion. The key point was that the statute offered the deductions to any parent who incurred an allowed cost at any school.

The dissenting justices asserted that the principle of neutrality forbids any tax benefit that subsidizes tuition payments to sectarian schools, and the U. S. Constitution's Establishment Clause forbids deductions for books and other materials used for sectarian purposes. They argued that the plaintiffs' data showed the tax deduction's principal effect to be financial support of sectarian schools.


According to the enclosed article available through the National Conference of State Legislatures Internet site, Mueller v. Allen prompted consideration of tax credits and deductions at the federal level and in many states during the 1980s. Minnesota expanded its program. Iowa and Arizona adopted tax credit for tuition laws; a similar act in Illinois was vetoed. Several states created voucher programs providing funds for parents to spend on the schools of their choice. Some of the laws have been challenged in court, with mixed results.

The Education Commission of the States (ECS) tracks tax measures designed to reduce parents' schooling costs. On the ECS Internet site (, there are several Education Week articles on tax measures as well as two comprehensive ECS surveys. We enclose an excerpt from “Vouchers, Tax Credits and Tax Deductions,” which is undated but contains 1999 information. The April 4 update of the ECS database, “Voucher and Tax Credit Legislation, 2000,” shows which states are considering each category of legislation:

1. To create voucher programs: Alaska, California, Illinois, Michigan, Missouri, Nebraska, New Jersey, Pennsylvania, South Dakota, and Washington;

2. To create tax credit programs: Connecticut, Delaware, Hawaii, Idaho, Kansas, Louisiana, Oklahoma, Rhode Island, South Carolina, Virginia, and West Virginia;

3. To create both voucher and tax credit programs: Georgia, Kentucky, Maryland, Massachusetts, New Mexico, New York, and Vermont; and

4. To amend previously enacted voucher or tax credit legislation: Arizona, Illinois, Iowa, Minnesota, Ohio, and Vermont.