EITC: A Tax Scam in Sheep’s Clothing

greedypersonIn 2001, the Pennsylvania legislature created the Educational Improvement Tax Credit Program (EITC) in order to encourage companies to donate money to private schools. This program – little known and even less understood – expanded over the years to the point where it has distorted an act of charitable generosity into a accounting trick stealing money from the public treasury and actually paying schools only a fraction of the money lost.

While Pennsylvania’s legislature is unable to agree on a budget, EITC has grown into a bonanza for those willing to game the tax system. Here is how it works: A profitable company or a group of high-income tax payers have a total annual income of $22 million. Normally, Pennsylvania would tax this income at a rate of 3.07%, yielding $675,000 per year to help fund all the needs of our commonwealth including the most underfunded public schools.

However, under this law, the company could commit itself (over the next two years) to “generously” donate $750,000 per year to their favorite education school or scholarship fund. They are then able to use 90% of the value of their donation (i.e. $675,000) as a credit against their obligations to support the needs of our tax. This completely offsets their state obligation!

If we stopped our calculations at this point it would be bad enough. The group or company would be taking $675,000 from the coffers of the state at a net cost of only $75,000 to themselves. This money wouldn’t necessarily go to meet the state’s educational priorities with a public school system plagued with crumbling infrastructure. Instead it would go to whatever elite private institution was lucky enough to have benefactors with such large tax bills which they need to offset, and the tax/legal-savvy to form the fictive corporations necessary to exploit this fiscal loophole.

Yes, we should give more money to schools, but money should go to schools according to their need, not according to the luck of the draw and the whims of the elite. This credit is only available to the wealthiest citizens and corporations. Accordingly, low-income Pennsylvanians pay the full 3.08% state income tax while their high-income counterparts can offset all or most of their tax obligation.

The government should strive to make the best use of its revenue. Call your State Representative and State Senator and tell them to end this insane system of Orwellian accounting which rewards self-interested manipulation in the name of so-called charity.

Full disclosure: I personally benefit from EITC with my donations to Jewish schools. While I oppose the concept, it is currently legal though capped at $75 million. I rationalize my participation in this program arguing that the money will go to an elite school to the benefit of some high-income taxpayer whether I participate or not, so why not me and the schools I support. Meanwhile, I am calling for an end to EITC in Pennsylvania.

International Jewish Funders Network Convenes in Philadelphia


Al Berger and Carol Auerbach, husband and wife, each heads up a private family foundation.  The Auerbach Agency at the Jewish Federation of Greater Philadelphia was founded by Auerbach when she lived in Philadelphia.  Now, as a board member of the Jewish Funders Network, she divides her time between New York City, Seattle, and Jupiter, Florida.

For the twenty-first year, the Jewish Funders Network convened its annual international conference, this time in Philadelphia at Loews Hotel.  The theme this year: What’s Your Story?  The Power of Narrative to Drive Change.

Andy Goodman, the keynote speaker, entertained the audience while transmitting very important points, about how to inspire others to support the various philanthropies represented by the 315 attendees.  

Dorit Straus shared the story of her chance encounter on a New York subway with the famous violist Joshua Bell, learning that Bell was the proud owner of a Stradivarius violin which had once belongs to an earlier generation’s highly regarded violinist, Bronislaw Huberman, who had a dream of creating an orchestra in Palestine.  Huberman managed to collect hundreds of professional musicians, saving them from the Nazis, and eventually establishing the Israel Philharmonic Orchestra.

More after the jump.


(left to right) Haim Emil Dahan, of Israel, greets Michael and Kristin Karp at the JFN conference at Loews Hotel in Philadelphia.  The conference attracted 315 individual donors, founders and staff members of private Jewish foundations.

Straus enlisted Academy-award-nominated filmmaker Josh Aronson to make a documentary film about the life of this almost forgotten hero, the violinist she credited with having saved her entire family.  Straus is serving as the executive producer of Aronson’s film, which they hope will be completed for a premiere in December 2011 for the 75th anniversary of the Israel Philharmonic.

Straus illustrated the way in which a story motivated the philanthropy.

Carol Auerbach, founder of The Auerbach Family Foundation, and the Auerbach Central Agency for Jewish Education in Philadelphia, spoke to the plenary session about the new technology and means of communicating with a larger audience and with the naxt generation of donors and philanthropists.

The afternoon workshops on Sunday included the well attended Strategic Investment in the New Media Space, moderated by Joshua Miller of the Jim Joseph Foundation, who explained a grant process aimed at 18 to 40-year-olds which involved a collaboration of three funders.


Gwen Borowsky, of the National Liberty Museum, and Eunice Miller, founder of the nonprofit Linkages, enjoyed the sessions at the JFN conference.

Miller introduced a panel, consisting of Lucy Bernholz, president of Blueprint Research and Design;  John Bracken of the John S. and James L. Knight Foundation; and David Bryfman, of The Jewish Education Project, focusing on engaging teenagers.
   The seesion alerted the funders to the existence of  the new on-line charity engine, “Kickstart,” which helps all kinds of projects and charities raise funds in a short period of time on the internet.
   There was a lively session on Jewish education with the interesting title, “Nor Your Zade’s (and Bubbe’s) Hebrew School.”
   Another added benefit, besides the quality of sessions and speakers, and the line-up of visits to the National Museum of American Jewish History, as well as the Barnes Museum beofre it re-locates to the Benjamin Franklin Parkway, was the opportunity for philanthropists and representatives of foundations from across the country, even from across the globe, to network and share experiences.


Josh Aronson, filmmaker, and Dorit Straus, executive producer of Aronson’s film, inspired by Straus’ encounter on a New York subway with the famous violinist Joshua Bell.  Bell was carrying a Stradivarius once owned by a Jewish violinist, Bronislaw Huberman, who pioneered the Israel Philharmonic Orchestra, gathering Jewish musicians who had fled the Nazis and saving 1000 lives in the process.  The film in progress, for which they showed clips, is entitled, “The Orchestra of Exile.”

Martin Lautman, Ph.D., and Betsy Sheerr were delighted to pose with the incoming president and CEO of the Jewish Funders Network, Andreas Spokarniy.

Among the hundreds of Jewish philanthropists gathered in Philadelphia for a three-day conference of the Jewish Funders Network, are (seated) Mark Solomon and Carol Auerbach, and (standing left to right) Paul Silberberg, Robin Batoff, and Morey Goldberg.  The three men are all part of CMS Industries in Wynnewood, Pennsylvania, which was a main sponsor of the JFN conference.

Philanthropist Charles Bronfman (right) receives a special award at the Jewish Funders Network from JNF past presidents Murray Galinson and Mark Cherendorff.  Video tributes included one from Shimon Peres.



Charles Bronfman’s 80th birthday happened to fall on the day he was honored in Philadelphia by the Jewish Funders Network.  Representing a group of students who had benefited from Birthright, the Bronfman-supported program which provides the gift of first time educational trips to Israel for Jewish young adults  to strenthen participants’ personal Jewish identity and connection to the Jewish people, are Penn students Elayna Zach and Adam Levinson, alumni of the Birthright program.



At the awards luncheon at the JFN international conference at Loews Hotel in Philadelphia, Bonnie Roche-Bronfman, a nationally recognized architect, was very proud of her husband, the honoree Charles Bronfman, head of the Andrea and Charles Bronfman Philanthropies.  Roche-Bronfman had recently organized and served as set designer for a New York theatrical production, “From the Fire,” commemorating the anniversary of the Triangle Shirtwaist Factory fire and tragedy.

Photos: Bonnie Squires.