The disputed Arizona law gives tax credits up to $500 to people who donate money to "school tuition organizations" that then provide scholarships to students for private schools, including religious institutions. The taxpayers who challenged the program, who were represented by the American Civil Liberties Union, claimed most of the money has been funneled to organizations that provide grants only to religious education.Note that the phrase "religious education" is probably misleading. I suspect that it's Christian education rather than, say, Buddhist education those donations ended up supporting.
The U.S. Court of Appeals for the 9th Circuit had ruled that the challengers had legal "standing" to sue and had presented a claim under the First Amendment guarantee that government "shall make no law respecting an establishment of religion."
In most situations, people cannot challenge government policies simply based on their status as taxpayers. A 1968 Supreme Court case, however, carved out an exception to that rule when tax dollars might be used to support religion.
In Monday's decision, the high court majority more narrowly interpreted the 1968 precedent, Flast v. Cohen. Kennedy drew a distinction between a tax credit and an actual governmental expenditure that might benefit religion. He declared that the challengers "cannot take advantage of Flast's narrow exception to the general rule against taxpayer standing" in the Arizona case.
Kennedy's distinction between "a tax credit and an actual governmental expenditure that might benefit religion" got this response from Kagan:
"Suppose a state desires to reward Jews — by, say, $500 per year — for their religious devotion," Kagan said. "Should the nature of taxpayers' concern vary if the state allows Jews to claim the aid on their tax returns, in lieu of receiving an annual stipend? Or assume a state wishes to subsidize the ownership of crucifixes. It could purchase the religious symbols in bulk and distribute them to all takers. Or it could mail a reimbursement check to any individual who buys her own and submits a receipt for the purchase. Or it could authorize that person to claim a tax credit equal to the price she paid. Now, really — do taxpayers have less reason to complain if the state selects the last of these three options?"The case went five to four to the state of Arizona. That was to be expected, of course, given the Republican bent of the Court. A more interesting case might be one which pits religious (say, ahem, Catholic) causes against corporations.